Over the past seven days, the cryptocurrency market has increased in value from $324 billion to $385 billion, as the bitcoin price increased from $8,000 to $8,800 and other major cryptocurrencies also recorded gains in the 10 to 20 percent range.
Up until last week, the price of cryptocurrencies including bitcoin, Ethereum, and Ripple were cheaper in South Korea in comparison to other markets such as the US, Japan, and Hong Kong. The lower rates of cryptocurrency in the local South Korean market and on cryptocurrency exchanges like Bithumb and Korbit were considered odd, given that the value of cryptocurrency has been generally higher in South Korea in the 5 to 30 percent range.
In South Korea, cryptocurrencies tend to be more expensive than other regions due to its low supply. The country has relied on miners in China and Japan to bring in cryptocurrencies but its ban on foreign cryptocurrency traders led the already small supply of bitcoin and other major cryptocurrencies to fall even further. Consequently, premiums on cryptocurrencies intensified throughout 2017 and 2018.
In consideration of these events and factors, analysts found the lower cryptocurrency rates in South Korea abnormal and a strong indicator of a bear market. Investors were no longer interested in investing in the cryptocurrency market even with a lower rate. In December 2017, when FOMO or fear of missing out struck South Korea, investors were willing to invest in the market with 30 to 40 percent premiums. As a result, when the bitcoin price hit $20,000 globally, in South Korea, bitcoin was worth $25,000.
The re-emergence of premium rates in the South Korean cryptocurrency exchange market signify a rise in demand for cryptocurrency in the local market. Investors have become more confident in the ability of the market to recover and the short-term performances of both major and minor cryptocurrencies.
At the time of reporting, on Bithumb, the country’s largest cryptocurrency exchange, bitcoin is being traded at $8,975, more than $1,000 higher than the global price $8,870. While the current premium in the South Korean cryptocurrency exchange market is not necessarily big, just the mere fact that premiums in South Korea have reappeared show the optimistic from investors towards the market.
Ethereum-based ERC20 tokens including Storm, Aion, Zilliqa, 0x, WanChain, and ICON have performed exceptionally well against bitcoin, which has recorded strong gains over the past week as well. Since April 16, within a week, the bitcoin price increased by more than 10 percent.
Traders have become more comfortable with taking risks by allocating their funds into cryptocurrencies outside of major currencies like bitcoin and Ethereum. Tokens like Zilliqa, Storm, and 0x for instance have risen by more than 20 percent against bitcoin over the past week, which would amount to about 30 percent increase against the US dollar if the strong performance of bitcoin is considered.
If the US Securities and Exchange Commission (SEC) acknowledges the requests of major venture capital firms like Andressen Horowitz and refrain from shutting down the entire initial coin offering (ICO) ecosystem with overly strict policies, the value of tokens will likely continue to increase throughout this recovery period.
Last modified: May 20, 2020 8:51 PM UTC