Cryptos Pivot Sharply Lower After Weekend Rebound; Bitcoin, Ethereum, Ripple All Down

After a favorable weekend rally, cryptocurrencies were back on the defensive Monday as investors took profits on bitcoin, Ethereum and Ripple. Although it’s still too early to determine if we are starting the next leg of the correction, market participants are still spooked about regulatory uncertainty in South Korea, not to mention the collapse of another notable project in BitConnect.

Bitcoin Falters

The value of bitcoin was down more than 7% at the start of Monday trading, according to Coinbase, a U.S. exchange that supports more than 13 million accounts. The BTC/USD exchange rate was lasts seen trading around $11,700 for a total market cap of $198 billion.

Bitcoin has had a difficult start to the year, with early gains wiped out over an 11-day period. Prices hit an intraday high of around $13,000 on Saturday before returning lower once more.

Although bitcoin’s declines are part of a broader market downtrend, it may have also lost some of its luster among new traders who are opting for more affordably priced altcoins. At the time of writing, bitcoin controls roughly 35% of the cryptocurrency market.

Altcoins Retreat

Outside of bitcoin, the picture was more or less similar, as all but two of the top 100 altcoins suffered declines. Starting from the top, Ethereum declined more than 6% to $1,067, Ripple XRP fell 9% to $1.42 and Cardano ADA declined 12% to 61 cents (all figures according to CoinMarketCap.com).

Bitcoin cash, an alternative bitcoin that forked from the original blockchain last summer, was down more than 9% at $1,805.

Behold, the sea of red:

The combined market cap for all cryptocurrencies has fallen more than 7% over the last 24 hours to reach $571 billion. Earlier in the day, the selloff dragged the market cap to a low of $543 billion.

Market Fundamentals Remain Unchanged

There was no apparent catalyst for the retreat on Monday, although the abruptness of the decline points to profit-taking after a weekend of steady gains. Many investors are also alarmed by South Korea’s lukewarm outlook on regulation. The chief concern is that, without South Korea, the cryptocurrency market would lose out on significant volumes, which would undermine the valuation.

A ban on South Korean exchanges would likely impact the market short-term, but this doesn’t guarantee long-term losses. As we saw in China ,a domestic ban will simply lead investors to offshore trading accounts. If regulators want to go after them, they’d need to step up surveillance of internet activity and virtual capital flows. This is a tougher sell in a democratically elected South Korea than it is in neighboring China.

As it currently stands, the prospect of a crypto trading ban is extremely unpopular in South Korea. Governments in democratically elected countries risk severe blow-back when they implement measures that overstep their boundaries.

Overstepping is exactly what a ban would be, according to the chairman of South Korea’s Fair Trade Commission. Kim Sang-Joo was recently quoted as saying that “the e-commerce law does not have the right to close virtual currency exchanges,” and that it is “impossible in reality.”

Until authorities confirm their intention one way or another, regulation will likely remain the market’s chief concern for the foreseeable future.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Author:
Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi