Week in Review: Cryptocurrencies Steady Following Two-Day Bloodbath as South Korea Weighs New Regulations

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The events of this past week proved once again that cryptocurrency speculation isn’t for the faint of heart. Between Monday and Wednesday, the digital asset class shed $285 billion in an epic flash crash triggered by speculation that South Korea was considering a new ban on domestic cryptocurrency exchanges.

Carnage in the cryptocurrency market compelled bitcoin’s neveau riche to enter into gold, which has also benefited from a slumping dollar and global uncertainty.

On Wall Street, equities set new record highs as corporate earnings came in better than expected.

Crypto Carnage

The global cryptocurrency market was worth more than $710 billion on Monday. Just two days later, it sunk to a low of $417 billion, according to CoinMarketCap. The rapid depreciation was caused by growing concerns over the future of cryptocurrency trading on the Korean peninsula.

South Korea’s government has assured the market that a blanket ban on trading had not been decided despite comments to the contrary by the Justice Minister. Of course, that didn’t deter mainstream media sources from insinuating that a ban was imminent.

The crypto market has rebounded from its Wednesday low, but remains about $300 billion shy of its all-time high. Bitcoin’s rally has stalled around $11,000 after the token dipped below $10,000 earlier.

Ripple XRP, the fastest growing cryptocurrency of 2017, briefly fell below $1.00 on Wednesday before rebounding at $1.50.

By end of day Friday, altcoins accounted or roughly 66% of the total market cap.

At the time of writing, the global cryptocurrency market was valued at $572 billion.

Bitcoin Traders Snatch Up Gold Bullion

Bloomberg ran a compelling story this week about bitcoin’s nouveau riche entering into gold amid the latest crypto market crash. Although the article spoke of bitcoin’s wealthiest investors, it shined the spotlight on a commodity that has struggled to win back investors amid the latest bull market in stocks and cryptos.

Bullion failed to put up any gains this week, but continues to trade at around four-month highs. On Friday, the February futures contract traded around $1,333.00 a troy ounce on the Comex division of the New York Mercantile Exchange. Its next price target is $1,351.00, or last September’s settlement high.

South Korea’s Regulatory Battle

The South Korean government is reportedly considering several measures to stem the tide of speculation in cryptocurrency. However, one of Seoul’s regulators has called a blanket ban on cryptos “impossible in reality.”

In a radio interview, South Korean Fair Trade Commission (FTC) chairman Kim Sang-jo said a ban was highly unlikely.

“There is no applicable legislation [to ban cryptocurrency exchanges],” Kim said, as reported by Finder.com. “Any violation of the electronic commerce laws is not enough in itself to legally force the closure of cryptocurrency exchanges.”

Kim also questioned whether the South Korea even meets the standard definition of a speculative market. In his view, the amount of money pouring into digital currencies is “not stable enough for it to be labelled as speculation.”

Stock Rally Continues

U.S. stocks rose to all new highs this week, extending a bullish new-year run that has added roughly 5% to the benchmark averages. The Dow Jones Industrial Average, S&P 500 Index and Nasdaq Composite each climbed to record levels on the back of solid quarterly earnings from major Wall Street firms.

As of Friday, 11% of S&P 500 companies had reported fourth-quarter results. Two-thirds reported positive earnings surprises and 85% posted sales figures that were higher than expected.

Wall Street has enjoyed a sustained bull market under President Donald Trump, who has promised to implement a pro-growth agenda centered on lower taxes, infrastructure spending and deregulation. With tax reform out of the way, the Trump administration is now eyeing a new infrastructure blueprint to rebuild American roads, airports and other transportation arteries.

The Week Ahead

Speculation about South Korea will continue to drive the cryptocurrency market next week, as investors look for tangible information about the country’s evolving regulations. Economic data and corporate earnings will also make headlines as the month of January draws to a close.

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.

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