Following news hitting the cryptocurrency markets on Thursday morning of the South Korean government looking to ban cryptocurrency trading and shut down the exchanges, the cryptomarket went into sell-off mode.
The market response was somewhat surprising when considering the implications, South Korean cryptocurrency holders needing to sell their coins in a worse-case scenario or at best, deal with the uncertainty of a possible clamp down on being able to trade on exchanges beyond South Korea’s borders a major issue.
Bitcoin slumped to a low of $12,000 in the early part of the day on Thursday, which was not far off Thursday’s $13,057.48 close.
There’s likely to be some debate over the government’s handling of the situation, with the government distancing itself from the Ministry of Justice that had released the statement on introducing legislation to bring to an end cryptocurrency trading.
Interestingly, there had been reports of a petition being signed calling for the resignation of the head of the Ministry of Justice in response to its statement. Whether the Ministry of Strategy and Finance flinched at the prospect of voter backlash will never be known, but one thing comes to light from the events of yesterday and this morning.
While governments and central banks will have some influence on the availability and performance of cryptocurrencies, voters will certainly make their voice heard. South Koreans have been known to hit the streets in protest and a backlash over such a ban would have certainly been an embarrassing one for the government, particularly when considering the size of the cryptomarkets today.
Through early part of the day today, the recovery has not been as spectacular for Bitcoin as for some of the other cryptocurrencies on offer. The less than impressive gains this morning will likely be down to two key reasons:
- Bitcoin trading volumes are less concentrated than other cryptocurrencies, with the threat of a South Korean ban on trading and the shutting down of exchanges in South Korea having less of an impact on Bitcoin demand and therefore price.
- Investors will have gone elsewhere in the early part of today in search of the more sensitive cryptocurrencies, which would have been a simple task. The cryptocurrencies that tanked the most on the South Korean news would have also most likely seen the biggest upside in the event of a U-turn, which would have also eased appetite for Bitcoin and the Bitcoin clan.
Bitcoin has gained just 3.32% to $13,683.1 at the time of writing and, as has been the case since mid-December, the Futures market may well be to blame, with the January Cboe Bitcoin futures contract rising by just $360 to $13,680 at the time of writing.
It will be interesting to see how Bitcoin moves through the weekend, once the futures markets are closed, with Bitcoin currently sitting well below the start of the week $16,300 high.
So, looking through the cryptomarket this morning, there have been some impressive returns for investors dipping their toes back into the market.
At the top end of the market cap table, Ripple has rallied 6.86% to 2.066 at the time of writing, recovering from a Thursday $1.514 low.
Going down the table, Stellar’s Lumen has been far more impressive, surging 21.6% through the early part of the day, with NXT and Binance’s BNB also impressing, with gains of 13.6% and 10.51% respectively.
While there have been some impressive gains, particularly amongst the more recently launched coins, a little more damage has been done to the cryptomarket and its image, with the fact that governments and central banks are able to have such an influence on the broader market being of particular concern.
Time will tell whether Bitcoin investors will regain the confidence to drive Bitcoin back towards $20,000, with the recent trends certainly suggesting that forecasts of $40,000 by the end of the year may have been a little too optimistic.
This article was originally posted on FX Empire
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