South Korea vs China cryptocurrency crash: How does this compare?
The South Korean Justice Ministry's news that it is considering banning cryptocurrency trading saw US$100 billion fall off the crypto market.
In just a few hours, the entire crypto market went into free fall, with over US$100 billion wiped off its market cap, while key currencies such as bitcoin, Ethereum and Ripple lost up to 20% of their value.
To be clear, after some clarification from the South Korean Prime Minister's office, it no longer looks as though South Korea is going to ban crypto trading. The government office said that the Justice Minister's proposed bill was just one option that was being considered around handling crypto, with the other more likely option being tighter regulation.
The South Korean government has become increasingly worried about cryptocurrency as more of its millennials begin to invest large sums of money, fearing that if it crashed it could be an economic crisis.
South Korea's won is the third most traded fiat currency in the world, and accounts for more than 5% of all bitcoin trades, 10% of all Ethereum trades and 15% of Ripple trades.
Here's a chart below that shows the whole cryptocurrency market in the proceeding 24 hours after the government's announcement, including the US$100 billion market cap drop.
You can see the massive drop in price almost instantly after the announcement was made as panic selling occurred; however, the market quickly started to recover, pushing it back towards where it was before.
It's a good sign for the strength of the market as adoption has skyrocketed in the past six months, especially when you compare it to the last major crash after a country announced it was stopping crypto trading.
At the end of 2013, when bitcoin had its first spike, hitting $1000 for the first time, China banned financial institutions from using bitcoin, creating a crash that seemed to last much longer than what this current dump already has. At the time, bitcoin trading in China was at similar levels of importance as crypto trading today is in South Korea.
You can see in that chart, there's an initial crash when the news about Chinese regulation hits; however, unlike the South Korean crash yesterday, the drop continues with another hit three days later.
This is a good sign for the crypto space as many believed that it could be vulnerable to another crash like the one after China's ban. However the last 24 hours have shown that it's not necessarily a certainty anymore.