Cryptocurrency markets rose after regulators in Europe and South Korea showed some Valentine's Day love and dialed back their rhetoric about regulation. At 14:05 UTC, the overall market capitalization for cryptocurrencies was $447.9 billion, an increase of 6.6% from 24 hours ago. The figure is also 38% above last Tuesday’s low of $279 billion.
The sweep in price trajectory propelled bitcoin past the $9,000 mark. At 14:36 UTC, it was trading at $9,228.89, up 8.37% from its price 24 hours ago. But the gains may not last. According to a Coindesk report, the Chinese Lunar New Year, which falls tomorrow, may result in a bout of selling as traders exchange cryptocurrencies for fiat currencies.
South Korea, which had earlier threatened to ban cryptocurrency trading, has since softened its stance. In a video posted on the government’s website, Hong Nam-Ki, minister of the Office for Government Policy, said they were focused on making crypto trading transparent (as opposed to banning crypto exchanges). Hong's statement came after the circulation of an online petition criticizing the government’s threat to ban crypto trading was signed by 200,000 people.
Mario Draghi, president of the European Central Bank, has also rejected the idea of ECB regulation for bitcoin. “It’s not the ECB’s responsibility to do that,” he said during a video interview yesterday.
A bulk of the gains for crypto markets occurred immediately after South Korea’s announcements. Litecoin, a cryptocurrency that Microsoft Corp. (MSFT) recently identified as a building block to create a decentralized digital ID (DID), overtook Cardano’s ADA to become the fifth-most valuable cryptocurrency. As of this writing, it was trading at $211.32, up 33% from its price 24 hours ago. In the last week, Litecoin's price has risen by 40.43%. (See also: Why Litecoin Is Vastly Underrrated.)
Meanwhile, Ripple continued to rack up positive press and consolidate its gains. It was reported to be among the fastest networks for processing transactions in JP Morgan’s recent Bitcoin Bible.
Money transfer giant Western Union also said it was testing Ripple’s technology for its business. UAE Exchange made a similar announcement earlier this week. In the last week, Ripple’s cryptocurrency, XRP, has pushed past the $1 mark and is up by more than 38%. As of this writing, it is changing hands at $1.07, up 3.71%, in the last 24 hours.
Will South Korea’s Announcement Make A Difference?
South Korea is the third most-popular venue for crypto trading after China and United States and has an extraordinary influence on cryptocurrency prices. For example, the exclusion of its cryptocurrency exchanges from CoinMarketCap.com’s listings resulted in a price crash for Ripple’s XRP. (See also: How CoinMarketCap Contributed To Cryptocurrency Price Crash.)
In recent times, the government has moved to tamp down on trading activity. For example, it is reported to have imposed a 22 percent corporate tax and a 2.2 percent local income tax on exchanges operating within the country. Separately, an anti-money laundering initiative found $472.3 million worth of illegal foreign trading of currencies using cryptos. (See also: Why Is South Korea So Important To Crypto Prices?)
According to reports, South Korea is considering a licensing platform similar to New York’s BitLicense for regulating cryptocurrency markets.
Bitcoin’s Fees Are Now 50% Of Total Reward
Fees from Bitcoin’s transactions are now 50% of the overall block reward for mining the currency. Previously, transaction fees constituted a very small percentage of overall fees, and miners made profits from the rising value of newly-generated coins. But the increase in difficulty of cryptographic problems solved to generate new coins has decreased their overall numbers, in recent times. After bitcoin’s 21 million coins total is mined, fee from transactions is expected to keep its price stable and generate profits for miners. (See also: Only 20 Percent Of Bitcoins Remain To Be Mined).
The current source of transaction volume on bitcoin’s network is trading volumes. But the proliferation of lightning network nodes and adoption of SegWit among major businesses within the ecosystem should help develop other use cases for the cryptocurrency. In turn, this will boost the number of transactions and help bitcoin’s price in the long run.
Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns small amounts of bitcoin.