THE bitcoin price has plunged amid a massive sell-off prompted by mounting fears of a trading ban in South Korea. But why is bitcoin falling so much today?
Bitcoin, Ripple, ethereum and other cryptocurrencies are continuing to fall today after uncertainty over crypto trading in South Korea triggered a panic sell-off of the virtual currencies on Tuesday.
Bitcoin’s BTC token plunged more than $1,000 (£725.90) between 7.14am and 8.34am yesterday, and has since hit rock bottom today at $9,650.34 (£6,992.83) around 2.57pm – its lowest price since the November 2017.
Cryptocurrencies were off to a pretty volatile start this year, but reports of South Korean regulators cracking down on exchanges shook the entire digital currency market.
Earlier on Tuesday, Finance Minister Kim Dong-yeon reiterated that a ban on crypto trading is still very much a “live option”.
Another senior official Jung Ki-joon said: “We will respond strongly to cryptocurrency speculation and illegal acts, but we will provide support to research and development relating to blockchain technology.
“The proposed shutdown of exchanges that the justice minister mentioned recently is one of the measures suggested by the justice ministry to curb speculation.”
Cryptocurrency trading in South Korea is highly speculative, more so than the rest of the world, at times trading with 30 to 40 percent premiums.
Crypto tokens were plunged into another crash last week when crypto tracker CoinMarketCap decided to pull Korean exchanges from its valuations. The move saw Ripple’s XRP token fall up to 30 percent.
South Korea’s Government is now working on a bill which effectively limit digital currency trade amid fears that speculative prices are a dangerous risk to investors.
China has already banned the trade of cryptocurrencies and Russia is toying with a similar idea.
But Korea’s plans have not been finalised yet and still need to be passed through Government for approval.
According to Matt Greenspan, an analyst at trading platform eToro, trade volume in South Korea and Japan has seen steady decline over the past days.
He said: "This morning, the combined volume from these two top crypto trading countries dropped below 30%.
Looks like they're tired of overpaying for cryptos and waiting for the market to even out."
Iqbal Gandham, UK managing director at eToro, added: "The market is correcting off the back of news that China is moving to crack down on cryptocurrency trading.
"Chinese investors are likely spooked having heard the news and the market is on edge as a result.
“But we don’t expect to see a major sell-off. Bitcoin in particular has gone through this cycle before, eventually shrugging off regulatory clampdowns from governments and central banks after initially falling in price.”
South Korea is a major market for bitcoin traders, with about 5 percent of all BTC traded for the Korean Won (KRW).
Gabor Gurbacs, at VanEck Associates Corp, argued following last weeks crash that news about crypto regulation has a knock-off effect on prices.
He said: “News on the regulatory front is dragging down cryptos.
“South Korea and China tightening is weighing on bitcoin and in the ICO market, things started slowing down, with the SEX cracking down on illegal offerings.”