Why are cryptocurrency prices plummeting this time?

Posted: 29 May 2018 1:17 pm
shutterstock crypto futures market 450x250

The bulk of the answer is probably found in South Korea.

The markets are enjoying another bloodbath right now, vigorously plummeting in search of a floor. The effect is near-identical across most coins, with all of them coming together in a synchronised drop starting at around the same time.

24 hour cryptocurrency market cap

What just happened?

This monumental downshift is probably caused by investigations into South Korea's two largest exchanges, Bithumb and Upbit, both of which are in the regulatory crosshairs right now. There have been some fairly serious allegations thrown around, along with suggestions that Bithumb and Upbit are busy reporting each other to the authorities.

At the same time, Upbit has just barred 11 countries from its exchange, and people are still keenly remembering last month's raids on South Korean exchanges.

The following might be the general mood in South Korea:

  • It's not a good time to have crypto on the exchanges there
  • Prices are going to get worse before they get better

Both of these are excellent reasons to sell and buy back at a lower price later. With analysts elsewhere agreeing that markets haven't found the floor yet, the smart money might be selling across the board, both responding to and driving bearish sentiments.

It's perfectly feasible that moves in South Korea alone are enough to hit the global markets with a domino effect. It wouldn't be the first time. A look at specific coin price movements, such as those of Ether, bolsters the theory.

What's Ether up to?

Ether took a high dive, with interesting patterns emerging across different exchanges and coins.

Its drop started on Bitfinex, but ETH prices followed suit on other exchanges before long and eventually went as low as $520 overall. However, on Bitfinex, they continued plummeting into the $400 range. Clearly one individual, or one party, was in a hurry to dump huge amounts of ETH ASAP and wasn't overly concerned with getting the best price possible at the time or avoiding an ETH crash.

It was most likely the EOS project. EOS crowdfunded millions of ETH for its platform, which is a direct Ethereum competitor, so it has both the means and the motive to deliberately scrap Ether prices where possible. The timing also makes sense, occurring just as Binance listed USDT/EOS pairs. The footprints also lead right to it, with 300,000 or so ETH disappearing from EOS wallets and massive amounts cropping up for sale on Bitfinex, which has typically been EOS's exchange of choice.

But that hasn't stopped EOS prices from plummeting too, and even tracking below ETH over the last 24 hours. At the same time, EOS/KRW (Korean won) pairs are going wild on Bithumb and Upbit. Clearly people are cashing out big time on South Korean exchanges.

It's possible that the EOS team decided to convert ETH to Korean won via EOS, but that's pure speculation. It might be because an EOS glut on South Korean exchanges might let them buy it back at even lower prices later, while the larger ETH markets wouldn't be as cooperative. Or simply because that gives better value for money than cashing out so much ETH directly. But it's all pure speculation, and EOS/KRW pairs have always been popular anyway.

Why are markets plummeting?

It might also have something to do with the recent announcement of investigations into crypto price manipulation from the USA. Some manipulators might be cashing out and quitting while they're ahead, while others might be having a last hurrah and dropping prices while they can to buy back in at a lower price.

Or maybe it was contributed to by the emergency sale of seized crypto from German authorities or by the ongoing spate of 51% attacks.

But it's not possible to say for sure. The most likely explanation is probably just straightforward uncertainty in South Korea, combined with broad price drops causing a lot of cashing out and Tethering as one would expect in an eventful market that's currently heading downwards in search of a floor.

Disclosure: At the time of writing, the author holds ETH, IOTA, ICX, VEN, XLM, BTC and NANO.

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

Latest cryptocurrency news

Picture: Shutterstock

Get into cryptocurrency

Ask an Expert

You are about to post a question on finder.com.au:

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Finder only provides general advice and factual information, so consider your own circumstances, or seek advice before you decide to act on our content. By submitting a question, you're accepting our Terms of Use, Disclaimer & Privacy Policy and Privacy & Cookies Policy.
Go to site