The cryptocurrency market on Tuesday was trading in red; not just star cryptocurrency Bitcoin slumped but others such as Litecoin, Ethereum tanked too, and as much as 20%. While the cryptocurrency mania continues, one decision by one of the many websites led to this bloodbath in the cryptocurrency world.
CoinMarketCap posted a tweet on Monday, saying that it was excluding some Korean exchanges in price calculations due to the extreme divergence in prices from the rest of the world and limited arbitrage opportunity. “We are working on better tools to provide users with the averages that are most relevant to them,” it added.
After the announcement, the total market capitalisation tanked by more than $150 billion. Bitcoin slumped as much as 14 percent as the world’s largest cryptocurrency continues to be whipsawed by concerns about regulation and demand from Asia.
Some reports also suggested that both China and South Korea are increasing oversight on trading and mining of cryptocurrencies. Meanwhile, Reuters reported that two US companies withdrew proposals to launch bitcoin-based exchange-traded funds pending before the Securities and Exchange Commission (SEC) on Monday, citing ongoing concerns by the regulatory agency.
“Every crypto is priced at a 30% premium in South Korea,” said Greg Dwyer, head of business development at cryptocurrency derivatives exchange BitMex. “By removing that, it looks like the market cap fell by 30 percent and so people rushed to sell because they’re not sure what’s happening.”
“South Korea has always had a premium because it’s very difficult to get cash out of the country,” said Dwyer. “Anyone looking to take advantage of an arbitrage in South Korea needs to do it with fiat currencies.” Ripple’s currency XRP fell more than 30 percent on the day, after hitting an all-time peak of around $3.84. In 2017, XRP soared 35,000 percent, surpassing bitcoin’s surge of around 1,500%.
However, the massive fall is not a first for Bitcoin. It plunged by 30% to below $12,000 on December 23, as investors dumped the cryptocurrency after its sharp rise to a peak close to $20,000 prompted warnings by experts of a bubble.