Cryptocurrencies have started the week with investors fearing crackdowns will impact major currencies. Bitcoin futures fell 20%, causing trade to halt temporarily while bitcoin prices fell to under $11,000 for the first time since December.
South Korea's potential shutdown of virtual currencies is to blame.
Finance Minister Kim Dong-yeon confirmed during a radio interview that South Korea is still considering shutting down virtual currencies. Reports last week started to impact currencies after South Korea mentioned that it would start regulating speculative cryptocurrencies. The country's government then stated that a ban would only occur after sufficient consultation.
Bitcoin trading volume in South Korea is around 3.5%. CryptoCompare says the U.S. accounts for 42% of all bitcoin trading.
The announcement sent other digital currencies tumbling to start the week, with Ripple falling over 35% and Ethereum falling over 22%.
China instigated additional investor fear to start the week. The country may block domestic access to cryptocurrency platforms. Bloomberg claims that China may also target individuals and companies that allow centralized trading.
China's central bank further reports the recommendation that authorities should ban centralized trading of digital currencies. Bitcoin has gone through a similar cycle in the past. Experts say the market is going through a period of correction with Chinese investors reluctant to trade.
January is routinely a low point for cryptocurrencies based off of data from the previous three years.
Cryptocurrencies rely on blockchains that allow for an anonymous digital ledger. Governments fear that cryptocurrencies can be used for money laundering and drug deals due to their anonymous nature.
Blockchains are a secure approach to cybersecurity, which makes cryptocurrencies a secure option for transactions. The rise of blockchains has led to the creation of several companies that utilize blockchain for smart contracts.
Rentberry, a long-term apartment rentals service, makes use of blockchains to create smart contracts that are transparent for renters and landowners. Bank of America (BAC, Financial) is also reportedly investing heavily in blockchain technology.
Bloomberg reports that the company has applied or received a minimum of 43 blockchain patents. IBM (IBM, Financial) and Mastercard (MA, Financial) have also invested heavily in blockchain technology. The companies both have 27 patents targeting blockchain.
Blockchain technology is being tested by Visa Inc. (V, Financial), which is testing the technology for payments between businesses.
Bitcoin's value increased 1,400% in 2017, with the currency topping off around $19,500 a coin late in the year. Bitcoin has fallen to $10,650 to start the week. Bitcoin's rise as a decentralized digital currency is a cause of concern for many countries that fear digital currencies threaten traditional currencies.
Governments are also concerned that bitcoin is in a bubble, which will harm small businesses that stand to lose a significant amount of money if the currency bursts.
BitConnect's announcement that it is closing down its exchange and lending operations further fueled the early-week plummet in digital currencies. BitConnect has received two cease-and-desist letters from Texas and North Carolina.
The coin, founded a year ago, is down over 65% since January after reports that authorities have warned the company for unauthorized sale of securities.
Disclosure: Author does not have any stake in the listed equities.
