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Bitcoin plummets as South Korea plans to ban cryptocurrency trading

Summary:

  • South Korean government sends Bitcoin plunging as it plans to ban digital currency trading
  • Warren Buffet foretells cryptocurrencies are heading for a bad ending
  • Goldman Sachs says digital currencies could succeed as a real form of money in developing countries

All cryptocurrency geeks have heavily focused on South Korea recently as it’s ushered in the current pullback. Consequently the Bitcoin price lost momentum and slid roughly $4,000 from a peak a touch above $17,000. From a technical point of view it does not seem to be supportive of buyers but with digital currencies you never know when the price decides to make an abrupt turnaround.

South Korea deepens a rout seen in Bitcoin

After the news that South Korea decided to investigate six banks offering digital currency accounts to some institutions the country came back to the mainstream once again. The South Korean government reported overnight that it considers banning cryptocurrency trading which saw Bitcoin plummeting. Moreover, as per Reuters’ revelations the two largest country’s cryptocurrency exchanges were raided by the police and tax authorities on alleged tax evasion. A market response was so severe because South Korea plays a major role in the cryptocurrency industry being a crucial source of global demand for virtual coins. Park Sang-ki, the country’s Justice minister, told during a news conference that "there are great concerns regarding virtual currencies and the justice ministry is basically preparing a bill to ban cryptocurrency trading through exchanges". After the sharp pullback seen in Bitcoin the nation’s Presidential office said a ban on cryptocurrency exchanges had not been terminated yet and it was just one of the measures being considered.

link do file download linkBitcoin made a sudden drop following the South Korean story and even as the price tried to recover it failed to do so. Looking at the chart above one may suspect that sellers could have an advantage over buyers as they’ve been already able to take the price below a short-term technical support at 13600 points. Source: xStation5

Warren Buffet foreshadows cryptocurrencies will have a hard landing

Billionaire investor, chairman and CEO of Berkshire Hathaway Warren Buffet told CNBC on Wednesday that "with almost certainty they (digital currencies) will come to a bad ending" adding "we will never have a position in them". Buffet has been knowing for a long time as a sceptic of cryptocurrencies so his latest remarks should not be seen as shocking. He underlined that when you could lose 30% of you investment in a single day stress seems to be inevitable. Those comments came on the heels of a flip-flop presented by JPMorgan CEO Jamie Dimon which we wrote about on Wednesday.

link do file download linkBitcoin daily transactions slumped over the course of the past days being a possible reason for the price retreat. Notice that the DMA14 fell to the lowest level since late October 2017 when the Bitcoin price (the DMA14) was hovering below a $6k handle. Source: Bitcoin.com

Goldman paints the prosperous future for digital currencies

In the newly released report Goldman Sachs analysts wrote that digital currencies could succeed as a real form of money especially in developing countries. The bank stressed that many currencies in sub-Saharan Africa have lost value owing to surging inflation and supply mismanagement. The bank also said that Bitcoin could also be useful in regions where governments impose strict rules on the use of traditional currencies from other countries. GS suggested that its working assumption is that long-run cryptocurrency returns should be equal to (or slightly below) growth in global real output - a number in the low single digits, thus digital currencies should be thought as low/zero return or hedge-like assets, akin to gold or certain other metals.

link do file download linkMeanwhile Ethereum (ETHUSD) saw a correction after the price was unable to break through a resistance. As a result the price came back toward a broken upper boundary of an ascending channel and the future will depend on how the price behave here. A breakout of this line to the downside could bring about a pullback toward $1,000. In turn a successful test of the support might result in a bounce even above the red line painted at the chat. Source: xStation5

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