By Gina Clarke
Another day and another crash for Bitcoin, the volatile cryptocurrency of choice. Fluctuations of up to 10% are pretty common for this type of market, but the recent drop of almost 50% has rattled investors.
Although the cryptocurrency market has had highs and lows before, the fact that Bitcoin, in particular, was just last month heading towards the $20,000 mark and has now plummeted to just under $10,000 is obviously worrying.
But we need to remember that 10-years ago Bitcoin didn’t exist. Five-years ago they cost just $12 each, just last month they had reached record highs of almost $20,000 each.
So – what happened?
Well, we have to remember that by the end of 2017 Bitcoin had increased by 20 times its value, so critics were predicting a big fall. The currency has gained popularity in countries such as China where you aren’t allowed to hold a lot of cash due to capital controls. It’s easier to keep it in an e-wallet than your own pocket.
South Korea is the third-biggest market in the world for Bitcoin trades, behind Japan and the US, according to the digital currency website Coinhills. The Korea Blockchain Industry Association estimates that South Korea has more than a dozen cryptocurrency exchanges.
And there’s so much demand that the virtual currency has traded at as much as a 30% premium compared with other countries.
But last week their justice minister announced that the ministry was preparing a bill to ban cryptocurrency trading, which sent Bitcoin prices tumbling and threw the market into turmoil.
On Thursday, the BOK governor said the central bank had begun looking into the market’s impact on the economy. He said in a statement,
“We have started looking at virtual currency from a long-term standpoint, as central banks could start issuing digital currencies in the future. This sort of research has begun at the Bank of International Settlements and we are part of that research.”
The country has first-class infrastructure for IT networks and offers very fast internet connections – all things which make trading cryptocurrencies easier and faster.
According to analytics firm WiseApp, the number of cryptocurrency app users in South Korea has increased 14-fold in the past three months to about two million users.
Most are in their 30s with users spending an average of 26 minutes on the apps daily. Now, more than 200,000 people have signed a petition on President Moon Jae-in’s official website asking that the “happy dreams” of Bitcoin traders in South Korea can remain in place.
What about other Cryptocurrencies?
It’s worth remembering that there are over 1,300 cryptocurrencies in existence. And while Bitcoin dominates the market, several other digital currencies are making waves.
Major digital currencies have plunged in the last two days after reports raised concerns about increased regulation on cryptocurrencies in South Korea and China. Last week, XRP (Ripple) prices also appeared to fall after CoinMarketCap said it was excluding prices from certain Korean exchanges due to significant price differences with other markets.
On Wednesday, Bitcoin dropped below $10,000 on CoinDesk for the first time since late November. Ethereum was close to 18 percent lower near $865, after falling through the $1,000 level Tuesday, according to CoinMarketCap.
The digital currency plunge has wiped billions from the paper fortune of a cryptocurrency billionaire in just a few weeks.
Chris Larsen, co-founder and executive chairman of Ripple, may have been knocked from the five wealthiest people in America but at $15.9 billion he still beats 32nd place Rupert Murdoch, who has a net worth of $15.4 billion according to Forbes.
Ripple’s XRP coin has fallen 74 percent from an all-time high of $3.84 hit on Jan. 4, erasing a staggering $44 billion from the holdings of Larsen.
A guide to cryptocurrency
What is Bitcoin?
Invented in 2009 by Satoshi Nakamoto, his vision saw it would become a
“peer-to-peer version of electronic cash to allow online payments to be sent directly from one party to another without going through a financial institution.”
It runs on a technology known as blockchain, which is a digital ledger of activity that cannot be tampered with.
In recent years widespread use of Bitcoin means in some parts of the world, including London, you can now pay for everything from a coffee to nursery fees with the cryptocurrency.
What is Ethereum?
Ethereum is the name of a blockchain company that has created the digital token ether. But Ethereum and ether are now used interchangeably to refer to the cryptocurrency.
Ether is backed by a blockchain, much like Bitcoin, but the technology is slightly different and aimed at a specific use case: smart contracts.
A smart contract is one that is written in code into a blockchain. Once the terms of the contract are met by each party, a deal will be executed.
What is Ripple?
Ripple markets itself as a cross-border payments solution for large financial institutions based on blockchain technology. The Ripple digital currency, known as XRP, can be used by an enterprise to get instant liquidity needed in a high-value transaction, without having to pay fees.
XRP acts as a bridge between fiat currencies during a transaction. Ripple said transactions in XRP can be settled in four seconds, faster than any major cryptocurrency right now.
What is Litecoin?
Litecoin is probably Bitcoin’s closest rival in terms of the use case. Founder Charlie Lee has, on numerous occasions, said the cryptocurrency can be used for payments because it’s faster than Bitcoin.
Litecoin transactions take just over two minutes to go through, compared to an average of around nearly 300 minutes for Bitcoin.
However, there is a limited supply of 84 million litecoins, compared to 21 million Bitcoin.