Prominent bitcoin trader, investor, and researcher Tuur Demeester stated that the center mass for the bitcoin price would depend on the South Korean bitcoin exchange market in the short-term.
Bitcoin’s center mass for price may be in South Korea now: largest SK exchange has more vol than Bitfinex + Bittrex. Resistance at ₩4.5M: pic.twitter.com/yb71dMMxKc
— Tuur Demeester (@TuurDemeester) September 20, 2017
Earlier this week, South Korean cryptocurrency exchange Bithumb surpassed the trading volume of Bittrex and Bitfinex combined, two of the largest bitcoin and cryptocurrency exchanges in the market. More importantly, the trading volume and market share of the South Korean bitcoin exchange market overtook that of the Chinese bitcoin exchange market, officially becoming the third largest bitcoin market in the world behind Japan and the US.
Today, South Korea surpassed China in #bitcoin trading volume. South Korea’s Bithumb processes more volume than Bitfinex + Bittrex. pic.twitter.com/10fiT4YzJg
— Joseph Young (@iamjosephyoung) September 21, 2017
For many years, the South Korean bitcoin exchange market and its trading platforms have demonstrated extreme premium rates in comparison to other major markets such as the US and Japan. The demand toward bitcoin from casual investors, institutional and retail traders have been increasing at an exponential rate, especially due to the weakening of the US dollar and intensifying conflict between North Korea and the US.
Since early 2016, an increasing number of investors in the finance sector have started to embrace and adopt bitcoin as a safe haven asset and digital gold. Many investors have invested in bitcoin to avoid global markets volatility and devaluation of reserve currencies. Because the South Korean bitcoin exchange market have outgrown many major markets and demand from local investors are at all-time high, Demeester explained that in the short-term, the price of bitcoin may depend on the South Korean bitcoin market along with Japan and the US.
Even throughout bitcoin’s latest major price correction caused by the Chinese government’s nationwide ban on bitcoin exchanges, Bithumb, South Korea’s largest exchange, continue to demonstrate premium rates over other markets, securing the ₩4.2 million mark.
At the moment, the bitcoin price is demonstrating extreme volatility. Earlier this week, bitcoin demonstrated early signs of recovery by rebounding beyond the $4,000 mark after the finalization of the closure of leading Chinese bitcoin exchanges including BTCC, OKCoin and Huobi. But, on September 21, the bitcoin price endured yet another major correction, declining to $3,600 and since then, it has been relatively stable in the $3,600 region.
Eventually, as all of the Chinese bitcoin exchange market’s liquidity and traders move to neighboring markets like Japan and South Korea, and the two markets become the epicenter of the Asian bitcoin market, the bitcoin price would likely be able to find stability and recover.
Several key figures and experts within the cryptocurrency sector including Tim Draper, the billionaire early-stage investor who has funded some of the largest bitcoin exchanges in South Korea and Japan, explained that the exit of the Chinese bitcoin market will provide to be a positive event for the bitcoin industry because Japan and South Korea has significantly more efficient and practical regulatory frameworks for both businesses and investors.
Earlier this year, the Japanese and South Korean governments legalized bitcoin as a payment method. South Korea, which has been lagging behind Japan in terms of bitcoin innovation, market structure and trading volume, revealed a bill that would allow bitcoin companies to operate as proper financial service providers and remittance companies.
Son ji-hyoung of the Korea Herald explained:
“Under the bill that aims to revise the Electronic Financial Transactions Act, traders, brokers, or other business entities involved in cryptocurrency transactions would be required to get regulatory approval from the Financial Services Commission. The requirements include the retention of capital of at least 500 million won ($436,300) and data processing facilities.”
Most of China’s trading volumes will highly likely move to Japan and South Korea. Already, the majority of traders in China moved over to the Japanese bitcoin exchange market, allowing Japan to evolve into the largest bitcoin market in the world.