ameinfo - 1/11/2018 11:36:58 AM - GMT (+2 )
North Korea may be the biggest menace to world peace and human existence, but South Korea is the biggest threat to Bitcoin and crypto currency survival.
The country has single handily caused billions of dollars to crypto investments, lowering market caps and could deliver a knockout blow to the digital currency sector.
Business Insider reported that crypto currency markets are “tanking” on Thursday morning (today) after news of a shutdown in South Korea.
Crypto trading ban
First, the crackdown on Crypto in South Korea began with raids on digital currency exchanges.
“A few officials from the National Tax Service raided our office this week,” a representative of Coinone, a South Korean crypto exchange, told Reuters who added authorities there were also looking into another cryptocurrency exchange, Bithumb, for tax evasion.
On Monday, a Wall Street Journal report said South Korean regulators were prowling six commercial banks that manage bitcoin accounts.
South Korea is now putting together a bill to forbid crypto currency trading.
“South Korea’s justice minister said on Thursday the ministry is preparing a bill to ban cryptocurrency trading through its exchanges,” Reuters reported.
Overnight, Bitcoin lost more than 9% to trade at $13,458 a coin Thursday, and at time of publishing it was at $13,462, or -9.54%.
Reuters said Bitcoin was down more than 10 percent on the Luxembourg-based Bitstamp at $13,199, after earlier dropping as low as $13,120, its weakest since Jan. 2.
The entire cryptocurrency market is down more than $100bn at $636bn, after it hit an all-time high of $830bn early January, said CoinMarketCap.
Why is Korea so influential on crypto?
Strong Crypto demand
A similar Chinese crackdown on Bitcoin in September 2017 triggered a sell-off of nearly $1,000, bringing the price of the coin below $3000, but within hours, however, Bitcoin recouped most of those losses.
Today South Korea is a hotbed for crypto activity, fuelled by highly speculative bids that reflect Asian love for high stakes.
CNBC gives the example of Bitcoin once trading at $17,169.65 per token at S.Korean exchange Bithumb, or at a 31% premium to the CoinDesk average price, a situation coined (no pun intended) “kimchi premium” by many traders.
Today, the country is a hyperactive market for crypto currencies, with Bitcoin, trading at more than 40% premium on exchanges across the country, relative to US exchanges, and 5% of all Bitcoins are traded against the national currency “won”.
Quoting industry website CryptoCompare, CNBC reports that it’s not just Bitcoin, but also more than 10% of ethereum is traded against the “won”, making it the second largest concentration in terms of fiat currencies behind the dollar.
CNBC said that an “outright ban will require a majority vote of the total 297 members of the National Assembly, a process that could take months, or even years.”
Losses hit crypto stocks as well.
Crypto Shares down
Industry specialist CoinMarketCap said that as of this morning, it has excluded some Korean exchanges in price calculations due to the extreme divergence in prices from the rest of the world and limited arbitrage opportunity.
“We are working on better tools to provide users with the averages that are most relevant to them,” said CoinMarketCap.
While this may bring prices up again and shelter against other catastrophic losses, the move came too little too late to save shares trading in crypto.
“Bitcoin exposed stocks in South Korea took a major hit after the announcement. Shares of Omnitel, which has a bitcoin remittance business, crashed 30%, Vidente shares, stakeholders of Bithumb, tumbled 29.96%, Digital Optics fell 13.7% and KPM Tech was down 5.48%,” said CoinMarketCap.
Retuers reported that some investors appeared to have taken preemptive action.
”I have already cashed most of mine (virtual coins) as I was aware that something was coming up in a couple of days,” Eoh Kyung-hoon, a 23-year old investor told Reuters.
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