Virtual Currency Market Black Wednesday... No Positive Signs

Bitcoin Plummets to 42.59 Million Won on 19th... Altcoins Show Larger Declines
Regulations Begin in Various Countries... Bitcoin ETF Approval Also Challenging

[Image source=Yonhap News]

[Asia Economy Reporter Gong Byung-sun] Major cryptocurrencies, including Bitcoin, have shown significant volatility, falling continuously before rebounding again. With no positive news in sight, the market remains unstable.

As of 8:30 a.m. on the 20th, Bitcoin was priced at 51.23 million KRW. At 10:10 p.m. the previous day, Bitcoin had dropped 20.2% from the previous trading day to 42.59 million KRW. It took only 30 minutes for the price to fall from 50 million KRW to the low 40 million KRW range. By the morning of the same day, it had rebounded back to the 50 million KRW level.

Altcoins are in an even more severe situation. At the same time, Ethereum was down 17.6% from the previous trading day, priced at 3.46 million KRW. Cryptocurrencies such as Serum, Quantum, and Ark still showed declines of around 30%.

The apparent reason for this decline is the reaffirmation of China’s tough stance on the cryptocurrency market. According to China Youth Daily the day before, three organizations?the China Banking Association, China Internet Finance Association, and China Payment and Clearing Association?issued a “Notice on the Risks of Cryptocurrency Trading and Speculation.” The notice stated that the volatility of cryptocurrencies threatens citizens’ assets and the normal financial order, and therefore should not be used in the market. These organizations also banned all new cryptocurrency issuance, investment, and cash conversion, warning that violations could lead to criminal prosecution.

However, there are opinions that this announcement did not directly cause the sharp drop. This is because China has been a country that has completely banned cryptocurrencies since 2017. In September 2017, the Chinese government prohibited new cryptocurrency issuance and trading. Although cryptocurrency mining was not explicitly banned, from 2019, cheap electricity supply to mining farms was cut off. Some local governments, such as Inner Mongolia, have completely banned cryptocurrency mining for energy-saving reasons.

No Positive News in the Cryptocurrency Market... Institutional Adoption Becomes Difficult

Analysis supports the view that the market plunged because there is no longer any positive news for cryptocurrencies. The decline occurred amid a lack of upward momentum, combined with regulatory actions by various countries and market disruptions caused by Elon Musk, CEO of Tesla. In fact, during Bitcoin’s surge, several positive developments emerged within the institutional sector. Famous companies like Tesla began to consider Bitcoin as an investment target, while financial institutions such as Goldman Sachs and Fidelity started developing Bitcoin investment products. In the Canadian stock market, a Bitcoin exchange-traded fund (ETF) was launched, with about $400 million (approximately 452.4 billion KRW) traded within two days of listing. On the 14th of last month (local time), the U.S. cryptocurrency exchange Coinbase was listed on Nasdaq, marking a milestone.

However, it seems unlikely that positive news will come from the institutional sector going forward. Regulatory measures appear to be intensifying. On the 13th, the U.S. Department of Justice and the Internal Revenue Service investigated the world’s largest cryptocurrency exchange for money laundering and tax evasion. The Department of Justice had hinted at regulation by compiling cases of illegal activities involving cryptocurrencies since October last year.

Integration into the financial sector has also become more difficult. There are growing views that launching a Bitcoin ETF on the U.S. stock market is becoming increasingly challenging. On the 11th, the U.S. Securities and Exchange Commission (SEC) Investment Management Division issued a statement describing Bitcoin as a “highly speculative asset.” This negative stance followed SEC Chairman Gary Gensler’s remarks on the 7th about the need for cryptocurrency market regulation. Ben Jones, head of ETF research at U.S. investment research firm Morningstar, predicted, “Approval of a Bitcoin ETF on the U.S. stock market seems unlikely within this year.”

Experts’ opinions are also turning negative. On the 19th, Michael Novogratz, CEO of Galaxy Digital, said in an interview with U.S. economic media CNBC, “The cryptocurrency revolution has happened, but the investor base remains unstable,” adding, “It will take a long time to rebound.” He is a prominent cryptocurrency advocate who had predicted that Bitcoin’s market capitalization would surpass gold’s.

Professor Lee Byung-wook of Seoul National University of Science and Technology said, “At the beginning of this month, many people probably gave up on cryptocurrency investment due to prolonged sideways movement of Bitcoin,” adding, “Elon Musk’s recent actions, shifting from supporting Bitcoin to pointing out environmental issues, have disappointed market participants, causing the price support level to collapse.”

This content was produced with the assistance of AI translation services.