Bitcoin’s price tumbled by approximately $2,000 to $13,703.38 within a couple of hours this morning after the South Korean government announced measures to curb “irrationally overheated” trading of cryptocurrencies in the country. (See also: South Korea To Impose New Curbs On Cryptocurrency Trading.) At 14:56 UTC, the price of a single bitcoin was $14,100.98, down 8.31% from its price 24 hours earlier.
The top 10 most-traded cryptocurrencies, which accounted for 83.5% of the total valuation in cryptocurrency markets, mostly imitated bitcoin’s price trajectory and fell. IOTA and bitcoin rival bitcoin cash were the biggest losers, shedding 12.28% and 9.78% of their respective values.
Ripple, which announced a consortium with Japanese credit card companies to test its technology, was the standout. Ripple was trading at $1.39, an increase of 6.49% from its price 24 hours ago. (See also: Ripple Briefly Toppled Bitcoin Cash To Become 3rd Largest Cryptocurrency.)
The overall cryptocurrency market was worth $559 billion at 15:04 UTC. That figure was the reversal of its course from the last couple of days, when it climbed to highs of $609 billion.
A Government Crackdown?
In its announcement on December 27, the government in South Korea threatened to close down cryptocurrency exchanges and banned anonymous trading accounts. These moves follow earlier measures of banning ICOs and ensuring Korean domicile for investors opening accounts in cryptocurrency exchanges. It has also fined Bithumb, the country’s largest cryptocurrency exchange, for a June 2017 hack.
Cryptocurrency mania gripped South Korean traders in 2017. In fact, according to reports, they are paying premiums of more than 30 percent over regular prices to trade in cryptocurrencies. Bithumb trading plays an extraordinarily important role in determining prices for altcoins, such as ethereum and bitcoin cash. (See also: Ethereum Price Sets New Record.)
Taken together then, the South Korean government’s moves might seem like a crackdown on cryptocurrencies. But S.G. Lee, Chairman of the Korea Fintech Industry Association, told the New York Times the government was more interested in sending a warning to investors about potentially overheated markets.
2018 Price Targets
The overheating of cryptocurrency markets has also affected operations at exchanges. Three well-known exchanges have already announced that they were not accepting new users. These moves may decline volatility and prices for bitcoin.
Nick Colas, one of the earliest analysts for cryptocurrencies and co-founder of DataTrek Research, has predicted a midpoint price of $14,025 for bitcoin in 2018. But that price spans a range of between $6,500 and $22,000 for the digital currency.
Bitcoin prices will also undergo four crashes of 40 percent or more during the course of 2018, wrote Colas. According to him, bitcoin’s volatility will continue because bitcoin and cryptocurrencies are “hard to value and their economic utility relies on use cases that are not yet built.”
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 0.001 bitcoin.