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South Korea Sinks the Cryptomarket

By:
Bob Mason
Updated: Jan 11, 2018, 10:35 UTC

The South Korean government is looking to shut the cryptomarkets. Is this the end of the road? Will other governments follow suit? Regulatory risk is certainly key and the cryptomarkets are far from free from government and central bank influence.

Cryptocurrency

It’s been a rough ride for the cryptocurrencies at the turn of the year and it looks like it’s going to get a little tougher before there is any improvement in market conditions.

The major cryptocurrencies have seen heavy selling pressure through the morning and it’s all been down to the South Korean government, which has continued to plague the cryptocurrencies since the end of last year.

Going back to the rallies across the cryptocurrencies in December, much of the gains were attributed to the increased trading activity in South Korea. Both Ripple and Litecoin were beneficiaries, with the pair managing to break through to record high levels through much of the 2nd half of December.

Things have shifted at the turn of the year however and it’s come down to regulatory risk. If investors were of the view that the cryptomarkets were free and clear of government and central bank oversight, they have been clearly mistaken and, while certain governments have been embracing, others have not.

The market is in its infancy and there is no common ground amongst the G7 or G20 on how to handle cryptocurrencies, so it’s each to their own and the South Korean government is certainly not aligned with the Japanese government, when it comes to Asia.

Concerns over cyber-theft may well be the government’s motivation, with frequent reports of the North Korean government steeling cryptocurrencies a major concern, as the North looks to build its nuclear capabilities and ruffle the feathers of the South and the West.


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Looking at current valuations, there will be a temptation for investors to jump in and take advantage of the recent declines, with Bitcoin down at sub-$14,000 and Ripple sitting at $1.6476. The argument could be that if things were really that bad then Ethereum would have also followed up with a sizeable loss. The difference here is that Ethereum’s gains didn’t come in mid to late December, of the back of rising demand from South Korea. Ethereum’s gains came in spite of the initial reports of the South Korean government looking to clamp down on the cryptomarkets, which makes Ethereum less sensitive to the news.

How the cryptos will fare through the remainder of the day remains to be seen, but with Cboe Bitcoin futures down at $13,740 for January expiry and with Bitcoin currently down 7.09% to $13,835, there’s not much wriggle room for the crypto and the other majors to look to move ahead on.

We are unlikely to get any comments from the South Korean government that could shift sentiment through the rest of the day, with the raiding of exchanges and investigations into South Korean banks, not to mention the Justice Department’s intentions to introduce legislation to ban the trading of cryptocurrencies all quite dire for the markets.

Unless there is a U-turn, things are likely to go from bad to worse until the exchanges find a way to circumvent the system and provide the platforms in other jurisdictions, away from the purview of the South Korean government.

It’s testing times and investors will be hoping that the anti-cryptocurrency movement does not spread to other major crypto-centres. While there is no news of such a scenario, as we have seen with the South Korean government, the decision can be spontaneous and that’s never good for a market.

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About the Author

Bob Masonauthor

With over 20 years of experience in the finance industry, Bob has been managing regional teams across Europe and Asia and focusing on analytics across both corporate and financial institutions. Currently he is covering developments relating to the financial markets, including currencies, commodities, alternative asset classes, and global equities.

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