The drop may be caused, at least in part, by South Korea's Finance Minister KIim Dong-yeon's remarks on a radio program that "the shutdown of virtual currency is still one of the options" the government has. South Korea is one of the largest markets for trading cryptocurrencies.
This is the second time within a short while that possible closing of South Korean exchanges has been announced by the South Korean government.
As reported in the Digital Journal on January 11, the Justice Minister announced that the government was preparing a bill to shut down exchanges. Later he seemed to backtrack. The announcement then was followed by a decline in the price of bitcoin as well as other cryptocoins.
Just this Monday, the government said it would only make a decision after "sufficient consultation and coordination of opinions."
The decline of bitcoin's price
According to
cnbc.com bitcoin's price dropped more than 17 percent to a low of $11,182.71 in a fall below $12,000 for the first time since December 5.
As I am writing this at 21:32 UTC the price of bitcoin
according to Coindesk was down below $11,000 at 10,602 down about 22 percent from its open. Bitcoin opened today at $13,585 and so far its low has been $10,549.80.
Other cryptocurrencies also fall
The second largest cryptocoin ethereum also had a sharp fall. Ethereum was down more than 20 percent also in the last 24 hours to $1,051.83 before recovering slightly.
Another major cryptocoin, Ripple, fell even more, 27 percent to $1.33 but recovered slightly to $1.36.
Later in the day, Ripple fell as low as about 90 cents!
China also reported to be cracking down even further on cryptocoin trading
Bloomberg reported Monday that China was planning to block domestic access not only to Chinese platforms but to offshore ones as well. Regulators are said to be planning to target people or companies that provide market-making, settlement and clearing services for centralized trading of the coins. Bloomberg, was citing "unnamed sources". It sounds as if person to person or decentralized trading would still be allowed.
A Chinese central bank official was reported as saying on Tuesday that authorities should ban the centralized trading of cryptocurrencies.
Iqbai Gandham, managing director of eToro in the UK said in an email:"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 ... Moreover, it you look at the last three years, January is typically the low point for cryptocurrencies. So this dip is not wholly unexpected."
Bitcoin price down steeply from December high
Last month bitcoin's price rose to a high of over $19,000.
Futures contracts also reflected the decline in price. CBOE's January 2018 contracts were at $11,760 down 12 percent for the session. At CME, contracts were down even more, more than 14 percent. The January contracts were trading at $11,935.
Asian buyers may be tired of paying premiums for cryptocoins
Mati Greenspan, analyst at eToro said:"The pullback seems to be coming from a lack of buyers in Asia. Japan and South Korea usually dominate this market but over the last few days, the volumes have been dropping steadily. This morning the combined volumes from these two countries dropped below 30 percent.The Koreans and Japanese are used to paying a premium of 20 percent or more per coin. It seems they're getting wise and waiting for the market to even out before buying in again.The reports are certainly not helping but in my assessment, the Asian market is simply tired of paying the premium."
Charles Hayter the CEO of Crypto Compare said that many investors may be taking profits to prepare for the risks ahead. He said also that uncertainty might be spooking the market as regulations are not clear as yet. There has been strong support for cryptocoins in Asia up to now. At some point in the decline, investors may decide that it is time to buy back in to the market.
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