This past week has seen a lot of action going on in the crypto markets that caused a lot of
concern for investors across all aspects of the crypto world. With Bitcoin starting off the week
trading at just a little over $17,000 then steeply declining to just under $13,000 halfway through,
it’s been one interesting week. But what does this mean? Are we looking at a decline?
What Caused All This?
Bitcoin and the altcoin exchanges are no different than other parts of the economy with their markets–they’re cyclical. All we really need to know is that Bitcoin goes down in price and invariably, Bitcoin goes up in price.
With that being said, there are typically some reasons to explain a dramatic shift in price whether it be an influx of new investors and additional funds into exchanges or, in the case of a dip, this week can most easily be explained by the “news” of South Korea potentially placing a ban on cryptocurrency exchanges and the removal of their pricing from Coin Market Cap.
Coin Market Cap
Coin Market Cap (short for “coin market capitalization”), is one of the single most visited sites in the crypto trading world, if not the most visited. This past week saw a quick shake in confidence, and a little confusion, when prices seemed to dramatically shift even quicker than the already volatile cryptocurrency marketplaces. But what’s to blame? If you weren’t following the developments closely, then you may not have heard about Coin Market Cap’s decision to remove pricing information from South Korean exchanges where Koreans pay, on average, 20% more than traders in other parts of the world.*
South Korean exchanges, especially Bithumb, make up a significant portion of the crypto trading markets and their removal from the aggregated global average price shifted the pricing dramatically.
It’s important to note that Coin Market Cap’s removal didn’t actually affect the real price for traders exchanging outside of South Korea, so for everyone in the US and Europe who have been using Coinbase/GDAX, Binance, KuCoin, etc., the actual price paid per asset was not inherently changed.
However, the removal of the prices from the aggregated average led to a shake of confidence and likely an unfortunate amount of panic selling by investors as they saw their previously realized gains dropped significantly in a matter of hours. While the price itself was not directly affected by the decision, the actions of those involved in the markets and major sell-offs were. The important part to remember is that the removal made no actual change in the value of your assets and prices have since returned to normal after the frenzy.
*[Note: Traders in South Korea pay what’s referred to as the “Kimchi Premium” where prices are 15%-25% above global averages due to the increased demand and volume in South Korean trading.]
South Korea – Banning Cryptocurrency Exchanges?
Yes, the next issue coming up is an even bigger concern and it’s based on South Korea as well. The most recent concern and larger driving factor for markets declining in the past week is due to the debate that’s currently going on in North Korea.