Arbitrage play vanishes in Bitcoin as Korea bubble pops
eliminate” their use as part of a payment system and in funding illegitimate activities.
Crypto regulation was also on the minds of the global elite at this year’s World Economic Forum, with British finance minister Philip Hammond urging governments to be “cautious.”
“Possibly we do need to look at the way we regulate this environment before the amount of outstanding bitcoin becomes large enough to be systemically important in the global economy,” he told Bloomberg TV.
Tech giant Facebook then got in on the act, banning all ads related to cryptocurrencies in an effort to fight scams.
All this has taken its toll on the value of bitcoin — the best-known virtual currency — which soared to nearly $20,000 before dropping back to less than half that value with wild daily swings.
But despite the negative publicity and the growing attention of regulators, enthusiasm for cryptocurrencies does not appear to be waning. BitFlyer, Japan’s main bitcoin exchange, told AFP it had actually seen increased interest after the Coincheck hack was revealed.
The deepening sell-off in cryptocurrencies has just claimed another victim: Bitcoin’s kimchi premium. Prices for the cryptocurrency in South Korea have tumbled back in line with those on overseas exchanges for the first time in seven weeks, erasing a gap that had swelled to 51 per cent in early January. The premium had been so persistent — and so unique among major markets — that traders named it after Korea’s staple side dish.
While its disappearance is partly explained by selling pressure from arbitrageurs, it also shows how dramatically investor sentiment has deteriorated in what used to be ground zero for the global crypto-mania.
Bitcoin has tumbled more than 60 per cent from its high in Korea after the nation’s regulators took several steps over the past two months to restrict trading and said they’re also mulling an outright ban on cryptocurrency exchanges. The country has been on the forefront of a global push by policymakers to rein in the frenzy surrounding digital assets amid concerns over excessive speculation, money laundering, tax evasion and fraud. “The bubble in cryptocurrencies has burst” in Korea, said Yeol-mae Kim, an analyst at Eugene Investment & Securities Co. in Seoul.
The kimchi premium began shrinking in mid-January as fears of a regulatory clampdown escalated.