Proving Overheated Speculation
South Korea’s largest cryptocurrency exchange Upbit disclosed its amount of daily transactions on January 16 for the first time. CoinMarketCap, arguably the most prominent global index of cryptocurrency prices, said that Upbit ranked first in the world in terms of 24-hour trading volumes with 4.92 trillion won (US$4.62 billion), according to the data received from Upbit. As another domestic cryptocurrency exchange Bithumb also took third place, South Korea’s speculative investment in digital currency was proved with the figures.
Upbit hasn’t been officially disclosing its trading volumes except for the announcement in December last year that the amount of its maximum daily transactions and its average daily transactions surpassed 10 trillion won (US$9.39 billion) and 5 trillion won (US$4.7 billion) based on its own aggregates. Established in October last year, Upbit recently completed its work for service optimization and was planning to begin registration of its cryptocurrency website by the middle of this month.
As Upbit released information about its daily transactions to CoinMarketCap, it has become No.1 firm in terms of global cryptocurrency transactions in a drive. Hong Kong’s Binance and South Korea’s Bithumb, which ranked first and second CoinMarketCap until yesterday, moved one notch down to second and third.
Until now, the government has argued that domestic cryptocurrency trading is overheating with irrational and speculative behavior but there objective data to support the claim. As domestic exchanges took first and third place in global trading volume, domestic cryptocurrency trading is proved to be overheated just like the government’s concerns.
The amount of 24-hour transactions on Bithumb stood at 3.48 trillion won (US$3.27 billion) and the figure reach 8.4 trillion won (US$7.89 billion) when combined with Upbit. It is far more than any other country considering the fact that the daily transactions in Hong Kong, which has two exchanges on the top 10 list in the world, amounted to 6.3 trillion won (US$5.92 billion) and in China 3.7 trillion won (US$3.47 billion).
Meanwhile, the cryptocurrency market has been receiving a direct hit by stronger regulations of three countries – South Korea, China and the United States – at the same time. As South Korea is planning to make a government-wide effort to strengthen regulations, the cryptocurrency bubble is expected to burst, along with China’s crackdown on cryptocurrency trading through online platforms and mobile apps and the U.S.’ taxation plans. The Deutsche Bundesbank, the central bank of Germany, also said on the 15th (local time) that transnational cooperation is needed to regulate digital currencies, including bitcoin. With greater regulation risks, the price of bitcoin plunged from some 25 million won (US$23,479) on the 7th to 15 million won (US$14,087) as of 7 pm on the 16th.
An increasing number of market watchers in South Korea also argues that the government needs to tighten regulations on virtual currencies. During an interview with local radio station TBS on the 16th, Deputy Prime Minister and Finance Minister Kim Dong-yeon said, “The suggestion to close down cryptocurrency exchanges is still an option under consideration,” stirring up the controversy over the shutdown of exchanges again. “There are many unreasonable and speculative transactions in digital currencies so the government believes that reasonable regulations in any form are needed”, said Kim.
As major countries in the world, including South Korea, are seeking to come up with stricter measures against cryptocurrencies, the domestic cryptocurrency market, which had continued to surge, is now on a downturn. Cryptocurrency experts expect that the virtual currency market, which has had an abnormal growth, will be gradually stabilized with a downward trend going through the regulation issues.