In the South Korean cryptocurrency exchange market, bitcoin is being traded with over 3 million won (US$2,741). Accordingly, market experts express concerns that this is an abnormal overheating phenomenon, with institutional investors, casual traders, and individual investors rushing to invest in bitcoin and the cryptocurrency market, and it has reached dangerous levels.
According to cryptocurrency market data provider CoinMarketCap on December 7, the bitcoin price stood at US$17,065 (18.67 million won) at South Korea’s digital currency exchange Bithumb at 2:30 pm on the same day. It was 3.57 million won (US$3,262), or 23.6 percent, higher than US$13,799 (15.1 million won) at the U.S. exchange Bitfinex at the same time.
The price of virtual currency Iota, which was listed on South Korea’s cryptocurrency exchange Coinone on November 28 for the first time, was nearly 50 percent higher than foreign exchanges for a while.
The price of digital currency is settled by exchange depending on offering prices of sellers and buyers as it doesn’t have a worldwide standard. Even so, it is common for it to have little difference with average market prices. Therefore, the excessive high price of virtual currencies recently traded at the South Korean exchanges compared to foreign counterparts is considered a sign that the South Korean market is abnormally overheated. The government has labeled digital currencies as a similar depositary business and banned securities firms from intermediating bitcoin futures transactions but it doesn’t work at all.
Park Nok-sun, researcher at NH Investment & Securities, said, “Unlike other countries, South Korea has a lack of supply, including digital currency mining, but there are new investors continuously flowing into the market and overbuying. When there is a price premium in South Korea, the price should go up in other countries as well. Otherwise, the price will go down so investors should be careful of a huge range of fluctuations.”
In regard to South Korea’s bitcoin frenzy, Bloomberg reported on the same day that South Korea accounts for a mere 1.9 percent of the global economy but it took up a whopping 21 percent of the total bitcoin transactions around the world as of the 6th. Bloomberg also said bitcoin has grown so popular in Korea as the country is geopolitically unstable due to Kim Jong-un’s increasingly belligerent regime and people, who have been disappointed with political turmoil at home since the impeachment of former president Park Geun-hye, want to take comfort in something outside and beyond the country.
Bitcoin prices already rose more than 40 percent this month alone. The price of bitcoin was some 1 million won (US$914) early this year but it has taken an upturn at a rapid pace to reach nearly 200 million won (US$18,273) after surpassing 100 million won (US$9,137) on November 26.
Such price increases was driven by the current atmosphere to consider bitcoin as an investment asset. Recently, the Nasdaq also announced that it plans to launch bitcoin futures after the Chicago Mercantile Exchange (CME) and the Chicago Board Options Exchange (CBOE).
In addition, the fact that a new cryptocurrency coin derived from bitcoin is created through bitcoin hard fork, which is often a result of a software upgrade of blockchain, and it boost earnings for investors, just like a kind of dividends, are another factors of the current bitcoin frenzy.