Week in Review: South Korea Triggers Crypto Meltdown; Stock Rally Reaches Epic Proportions

It was a roller coaster week for cryptocurrencies, as investors misread South Korea’s aim to regulate the market as an all-out ban on crypto exchanges. Meanwhile, U.S. stocks put up huge gains as earnings season kicked off.

Commodities rallied on a weak U.S. dollar, with crude futures climbing above $70 a barrel for the first time in three years.

Cryptocurrencies Plunge as South Korea Mulls New Regulations

Cryptocurrencies suffered a brisk selloff on Thursday on reports that South Korea was considering new reforms to stamp out speculation from the market. Investors had initially believed that regulators were looking to ban crypto exchanges all together. It would later surface that the government was actually looking to ban anonymous trading and ensure banks do not settle unverified cryptocurrency transactions.

Local media group Yonhap News agency provided more clarity on the proposed legislation:

“Under the new measure, only real-name bank accounts and matching accounts at cryptocurrency exchanges can be used for deposits and withdrawals, while the issuance of new virtual accounts to cryptocurrency exchanges will be banned.”

The cryptocurrency market briefly fell more than $100 billion on Thursday, as investors exited their bitcoin and altcoin positions. At one point, all but five of the top 100 cryptocurrencies were trading in the red, based on data provided by CoinMarketCap. (It’s important to note that CoinMarketCap now excludes South Korean exchanges from its daily volume and pricing data.)

Markets were in recovery mode on Friday, with the total coin value climbing back above $711 billion.

Stocks are Sizzling as Earnings Season Begins

Wall Street put up huge gains this week, as the major indexes closed at new records in four of five sessions. This culminated in back-to-back 200-point gains for the Dow Jones Industrial Average.

On Friday, the blue-chip index closed at 25,803.19, with all but six of its 30 components registering gains.

The broader S&P 500 Index rose 0.6% to 2,786.24. Meanwhile, the Nasdaq Composite Index added 0.7% to close at 7,261.06.

With the most recent gain, the major indexes have added between 4.2% and 5.2% since the new year.

Interestingly, the CBOE VIX Volatility Index has increased in six of the last seven weeks. The so-called “fear index” closed at 10.16. Despite the recent string of gains, it’s still too early to conclude whether volatility is making a comeback.

Fourth-quarter earnings season is also off to a good start, with more than two-thirds of S&P 500 companies reporting better than expected profit results, according to FactSet. While only 5% of S&P 500 companies have reported so far, their blended earnings growth rate is 10.2%.

Oil Hits $70

Oil prices extended their recovery over the past five days, as prices rose to their highest levels in three years.

Brent crude for February settlement briefly traded above $70 a barrel in the latter half of the week before settling at $69.88 a barrel on London’s ICE Futures exchange. The West Texas Intermediate (WTI) benchmark for U.S. crude also put up strong gains, eventually settling at $64.48 a barrel on the New York Mercantile Exchange.

Crude markets on Friday were unfazed by U.S President Donald Trump extending sanctions relief to Iran. One of the primary catalysts for oil prices had been the threat of new sanctions on Tehran, which would have likely affected its crude exports.

NAFTA on the Rocks

One of the world’s largest free trade agreements appears to be in limbo after two Canadian government officials said they were increasingly convinced President Trump will exit NAFTA. The North American Free Trade Agreement (NAFTA) has guided continental commerce for more than two decades.

President Trump has called NAFTA a horrible treaty for the United States given the country’s ongoing trade deficits with both Canada and Mexico. It is unclear whether Trump intends to pull the plug on the deal or use it as a bargaining chip.

The sixth and penultimate round of negotiations between Canada, the U.S. and Mexico will take place in Montreal later this month.

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