South Korea has established a reputation for being a “hotbed” of cryptocurrency activity, despite the government’s unwillingness to remove a ban on Initial Coin Offerings. One measure of this activity has always been that, next to the U.S. Dollar, the Korean Won stacks up as the second most traded fiat currency in connection with a crypto coin pairing. When 2018 commenced, however, trading volumes slipped and have been flat for the first three quarters of the year. October has arrived, and volumes are soaring.
Critics are forever looking for telltale signs of the early demise of the cryptocurrency phenomenon. Supporters have often feared the worst, especially when and if a leading country suddenly backed away. It is not that difficult, however, to find plausible reasons in the domestic market for the pullback. The “asset bubble” did burst, as many predicted. New legislation legalized exchanges, but forced them to require verified bank accounts with a local bank for all transfers and withdrawals, a move designed to curb the flow of Won cross-border and remove anonymity from the equation. Exchanges have complained since profits have taken a 90% nosedive from their previous highs.
The more compelling reason, perhaps, was that there have been a few high-profile instances of data breaches and associated coin losses from local crypto exchanges, namely, Coinrail and Bithumb. The former took a hit in excess of $40 million. Both exchanges suspended trading, freezing deposits and withdrawals, until related software and firewall issues could be resolved. Investors, under these conditions, would have required time to adjust or reconsider their exchange options.
As for soaring activity in October, one reporter noted that, “Since the start of October 2018, the cryptocurrency trading volume in South Korea has spiked. KRW trading volumes on certain days in October account for almost 50 percent of the total market share. This recent trend is a marked departure from the norm established at the beginning of 2018. For most of the year, KRW cryptocurrency trading volume remained stagnant until the middle of the year when it contracted significantly. From June all the way to September, virtual currency trading volume in the country appeared to shrink.”
The question then is why? There does seem to be a renewed confidence in the genre. In line with past history, South Korea “continues to be a haven for virtual currency commerce and blockchain technology.” Legalizing virtual currency exchanges as “legal entities” did help, as well. The reason cited more often, however, is that investors now view Bitcoin and others as “stable” stores of value, at least more so than with equities and bonds. As global stock markets recoiled during the month, investors sought “safe havens”. It may be a new development that the safety of some cryptos may now rank right alongside U.S. Treasuries and precious metals