Bitcoin declines, South Korea looks to ban trading, China’s Crypto crackdown – What’s actually happening?

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Bitcoin just reached its lowest point of the year with its price dropping rapidly in the past few days. It saw a massive drop from $13,204 to $12,106 in just 3 hours yesterday. After that, it started dropping at an alarming rate all the way to $10,000. Bitcoin’s current price is $10,122.

The world’s largest cryptocurrency has had an up and down journey over the last month. It had almost reached $20,000 at the start of December 2017 before falling massively. Bitcoin had a good start to the year as it recovered all the way up to $17,000 before falling again to $13,000. From then on, the digital currency had been fluctuating between $13,000 and $15,000 causing many to believe that the currency is finally settling down.

Image: coinmarketcap
Image: coinmarketcap

However, with reports suggesting that the South Korean government is set to ban crypto trading altogether, Bitcoin saw a massive decline. The cryptocurrency fluctuated between $10,000 and $11,000 yesterday and it finally fell down to its current value of $10,122.

Image: coinmarketcap
Image: coinmarketcap

The announcement to ban cryptocurrency trading in South Korea has not only affected Bitcoin but has affected the entire crypto market. There has been a massive decline in almost all cryptocurrencies. Ethereum dropped by 20% in the last 24 hours, Ripple also dropped by 24% (barely hanging above the 1$ mark), but other prominent currencies such as NEO, NEM, and Stellar have fallen by double digits.

The South Korean government looks to crack down on illegal trading but hasn’t let go of the possibility of banning cryptocurrency trading in its entirety. South Korea is one of the world’s biggest cryptocurrency market where the highest amounts of many cryptocurrencies are traded. Thus, a ban on cryptocurrency trading in South Korea could be a disaster for the crypto market.

Despite the announcement regarding cryptocurrency, the South Korean government also wants to also conduct research and development on Blockchain technology, the technology almost all cryptocurrencies use. Last week it was revealed that the government would shut down all active exchanges. 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.”

The South Korean government has been trying for over a month now to prevent cryptocurrencies from inflating further. Last month it imposed strict regulations in order to prevent Bitcoin from going further up, it was partly successful in doing so as well. Then, only last week government-sanctioned authorities raided two of the country’s biggest trading platforms Bithumb and Coinone.

Despite all of the current developments, the Finance minister Kim Dong-Yeon doesn’t want to totally ban crypto trading. However, he does say that there needs to be regulation: “All government ministries agree on the need for a government response to an overheating in cryptocurrency speculation and for a degree of regulation.”

With the South Korean government quite possibly be banning cryptocurrency trading, the South Korean military has already started to take steps against cryptocurrency trading. Since Monday, the Ministry Of National Defence started putting up firewalls in order to prevent soldiers’ access to cryptocurrency exchanges. The ministry sent out a notice saying: “According to internal rules, we will gradually shut down internet access to websites on encrypted currency starting Monday.”

The ministry is also working to curb cryptocurrency trading by other means other than just blocking access to crypto exchanges. With soldiers already being prevented from trading cryptocurrencies, it seems likely that the entire country won’t be able to trade soon enough.

There have also been multiple reports claiming that China is also following suit in imposing regulations against cryptocurrency. The reports suggest that the Chinese central bank proposes a wider ban on cryptocurrency trading that would include domestic and off-shore trading platforms.

This ban would include services such as mobile wallet apps and clearing and settlement providers in order to prevent Chinese citizens from trading in cryptocurrencies. They will also block cryptocurrency platforms that allow centralized trading. China produces the most bitcoin in the world through the mining process and if the proposals for the bans go through then crypto holders in both currencies would face huge losses.

It can be argued that China’s reasoning could be because of how much energy is consumed daily due to the mining process. However, it seems that the government is more concerned about security as Chinese financial regulators seem to have found links between cryptocurrency trading and activities such as money laundering. Because of this, many crypto exchanges have been forced to stop operations and Initial Coin Offerings (ICOs) have also been banned.

Ban proposals in two countries who so happen to be giants in the cryptocurrency market has caused a lot of panic selling. It seems very likely that the South Korean government will ban cryptocurrency trading given that it’s already been banned for its soldiers. People will lose a lot of money which explains why the crypto market is suffering due to panic selling. People would rather not take the risk of waiting to see what happens regarding the ban proposals.

The cryptocurrency market saw almost $250 billion of the market cap being wiped out in just a few days. That’s a huge blow to the cryptocurrency market which might be on the verge of a collapse if this continues.

Ever since cryptocurrency started booming, many people warned against investing as the market is too unstable and unpredictable. This might have been the case as recent developments have seen lots of people losing a lot of money in a short period of time.

Image: coinmarketcap
Image: coinmarketcap

There’s still hope for the cryptocurrency market as these are only two countries, perhaps cryptocurrency starts booming in the rest of the world. However, other governments might join South Korea and China in regulating cryptocurrency which would be even worse for the digital currency market and the people investing in it.

The cryptocurrency market is unstable, but a complete ban would result in a huge loss as discussed. Instead, the South Korean government should continue to place regulations to keep the market in check. Similarly, if China maintains its stance towards banning ICOs, then there’s a lot of wasted potential with NEO. Until the South Korean government makes a final decision regarding the ban, the cryptocurrency market will continue to suffer.

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