The cryptocurrency market experienced yet another major correction for the second time this week, as the price of both major and small cryptocurrencies fell by large margins.
On January 12, almost immediately after South Korea’s Justice Minister Park Sang-ki falsely claimed that the government is drafting a law to effectively ban cryptocurrency trading, the price of nearly every cryptocurrency in the global market fell in value.
Particularly, cryptocurrencies with their daily trading volumes heavily concentrated in the South Korean market such as Qtum, EOS, and Zcash fell by larger margins.
Subsequent to the initial cryptocurrency trading ban incident, the price of most major cryptocurrencies such as bitcoin, Ethereum, Ripple, Bitcoin Cash, and Cardano plunged, recording over 10 percent in daily losses.
Although the market seemed to recover shortly after the cryptocurrency trading ban rumors were refuted by the South Korean government and the Blue House, the executive office of President Moon Jae-in, the market suffered another major correction today, on January 15.
Within the past 24 hours, the valuation of the cryptocurrency market fell from $742 billion to $683 billion, by nearly $60 billion.Bitcoin, Ethereum, Ripple, Cardano, Stellar, and IOTA recorded almost 10 percent in daily decline, while smaller cryptocurrencies such as Bitcoin Gold and Tron demonstrated larger losses in value.
Even cryptocurrencies with trading volumes heavily concentrated in the South Korean market, which tend to trade with high premiums, have plummeted in value. In the South Korean market, the price of bitcoin fell by around 12 percent, while Ripple fell by 12.65 percent.
Song Eng, a cryptocurrency research, revealed that Binance has become a billion dollar startup in the shortest time in history. Within six months, it has become the largest cryptocurrency exchange in the global market, with a market valuation of nearly $2 billion.
“What determines its market cap? In August, Coinbase raised $100m from prominent VCs at $1.6bn, confirming its status as the first ‘Bitcoin’ unicorn. While their business models are not identical, Binance likely has surpassed Coinbase in trading volume and at its current rate should take global #1, given that it operates in Asia (Japan/China) and Asia is 40%+ of global Bitcoin trading,” wrote Eng.
Exchanges like Kraken, Bitstamp, Coinbase, and Binance are said to be adding over 100,000 users on a daily basis, and consequently are struggling to meet the demand from their users.
Evidently, given the exponential increase in the growth rate of cryptocurrency exchanges, there exists a significant demand for cryptocurrencies. But, it is also important to consider the rate of the growth of the market.
Short-term major corrections prevent bubbles from forming, by shaking off weak hands and solidifying the market. After a 20 percent decline in the valuation of the cryptocurrency market, a large number of weak hands or speculators tend to exist, while strong hands remain in the market.
Given sufficient demand for cryptocurrencies from the global market, it is likely that the market will recover in the upcoming days, as it recovers from the South Korea trading ban controversy.
Featured image from Shutterstock.