Korean professor Jaewoo Cho talks about the current situation of South Korea's "cryptocurrency craze" and government regulation, as well as six indicators for predicting the future

Author: PANews, Wu Shuo Blockchain authorized editor to reprint

Wu said: Jaewoo Cho is my friend on Twitter. After PANEWS invited me to do an AMA in the Korean community, I also recommended Jaewoo to them, and asked him about the background and authenticity of Korean news. South Korea may be the most enthusiastic country in the world for cryptocurrency besides the United States and China. They are particularly obsessed with chasing some altcoins. South Korea's influence on the global cryptocurrency market cannot be underestimated. Recommended reading. It should be noted that the AMA time is July 29.

Jaewoo Cho is a professor of social sciences at Seoul National University in South Korea. In 2013, Jaewoo Cho accidentally came into contact with blockchain technology while studying in the United States, which opened the door to a new world. Since then, he began to explore the blockchain field. In 2016, Jaewoo Cho began to contact the BitShares community and worked as a BitShares validator. During this process, Jaewoo Cho came into contact with the blockchain social network Steemit and became one of its more than 20 validators, and invested in the construction of the Steemit ecosystem. Currently, Jaewoo Cho also writes columns for many Korean media.

PANews: Regarding the Korean cryptocurrency market, first of all, I would like to ask, what do you think are the similarities and differences between the development of the Korean blockchain market and that of other countries?

Jaewoo Cho: From a global perspective, the common points are similar. If there is "To da Moon" overseas, there is Gazua(가자) in Korea; if there is HODL overseas, there is johnver(존버) in Korea. I think the dream of achieving a comeback in life through cryptocurrency is also universal across national boundaries. The difference is that the Korean government and some older private investors generally have a negative attitude towards cryptocurrency. Moreover, the public's attention to altcoins is much higher than that to Bitcoin.

The Bitcoin mining part of the cryptocurrency industry in South Korea is still lacking. Although the public's perception has changed a lot, there is still a lack of in-depth, ideological and social understanding of cryptocurrency. Most people still expect to make quick money by speculating in cryptocurrencies and make profits by doing cryptocurrency-related work. But it seems that not many people have really considered how much the world will develop and progress through blockchain technology.

On the bright side, I think Korean investors are relatively wise when investing. Some of the Korean investment experts I have seen are no less capable than those in the world in terms of the information they have and their ability to analyze relevant information.

PANews: This year, cryptocurrency speculation has suddenly become popular in South Korea. Whether it is variety shows or news, you can hear discussions about cryptocurrency speculation and mining everywhere. Including the news that a Samsung employee made 40 billion won by speculating in cryptocurrency, which also caused heated discussions. Please tell us what you think about the craze for cryptocurrency investment in South Korea? What is the future development direction?

Jaewoo Cho: On October 15 last year, I wrote a column titled "The blockchain boom is coming again." Coincidentally, the bull market came soon after the column was published.

Therefore, the current investment boom is actually expected. Strictly speaking, it can be said that the upward momentum began to sprout when the $9,000 mark was maintained in May last year. I personally hold a relatively optimistic view on the future market prospects.

When the market fell on May 19 this year, some people said that the bull market was over, but I have always believed that the market is not yet ready for a bull-bear transition. Fortunately, the key $30,000 mark was supported at the time, and market sentiment changed again.

It is expected that the market will usher in a bull market again in the next few months. Of course, this is also my personal guess. Considering that the main market participants have turned to US institutions, the market is still relatively optimistic. Compared with when they entered the market last year, the current price is not very reasonable.

PANews: The South Korean government has strengthened its supervision of exchanges, requiring exchanges to complete real-name authentication and apply for licenses as soon as possible. However, banks have currently suspended the opening of accounts for new exchanges. It is predicted that only the four major exchanges including Bithumb, Coinone, Korbit, Upbit and Gopax may survive. What do you think about this?

Jaewoo Cho: I agree with this view. At present, the four major exchanges have accepted the real-name management, so it is estimated that there will not be much movement in the short term. Gopax has not had any major problems, and it is backed by DCG, a large investment company, so I think it is very likely that Gopax will survive. However, due to the large number of exchanges, other exchanges may find it difficult to survive in the domestic market with limited resources. The profit margins of exchanges have already declined, and if they want to take shortcuts, they may be regulated, so other exchanges are currently in a dilemma. Of course, this still depends on what policies the government will adopt to regulate.

PANews: I saw you wrote on Twitter that "Even if I am a Bitcoin Maximalist, I should support Ethereum now. Only when Ethereum recovers can we pull Bitcoin out of the ditch." Similarly, many big names in the industry claim that the market value of Ethereum will exceed that of Bitcoin. So in your opinion, what is the reason why everyone is optimistic about Ethereum?

Jaewoo Cho: I say this because Ethereum has been less hit than Bitcoin in this market downturn. And Ethereum now has strong momentum from EIP-1559. If a project as big as Ethereum has strong momentum, I think it can also inject vitality into the sluggish market.

Although I am optimistic about Ethereum, and it is not impossible for Ethereum's market value to exceed Bitcoin in the short term, I will still consider these two projects from different dimensions. Ethereum is a blockchain that provides services, while Bitcoin is a blockchain that stores and transfers value. Therefore, I still support both projects.

PANews: As far as I know, you have a deep understanding of on-chain data. Can the content you mentioned in the previous question also be found in on-chain data? In addition, what are the on-chain projects you are most optimistic about? Can you help us analyze the long-term market situation?

Jaewoo Cho: Although what I just mentioned can be confirmed by examining multiple indicators, the most representative data is the "number of active addresses".

(Figure 1: Bitcoin Active Address Number)

(Figure 2: Ethereum Active Address Number ETH Active address)

(Figure 3: Bitcoin LTH-NUPL)

(Figure 4: Ethereum LTH-NUPL)

In addition, I recently noticed an index called “bitcoin supply held by addresses with balance less than 0.001 BTC”. Although I am not sure why, this index is highly correlated with the price of Bitcoin.

Figure 5: Correlation curve between bitcoin supply held by addresses with balance less than 0.001 BTC and bitcoin market price

The above chart shows the index curve for the past five years. It is not difficult to see that the synchronization rate between the index and the market price is surprisingly high. Moreover, the index fell sharply after soaring in early January 2018 and late April this year. So I think that if you grasp this point and make good use of it, you can reduce the risk of overheating in the market.

There are many variables in the cryptocurrency world. When it comes to predicting the market direction, I can only cautiously say that short-term investors may see a wave of upward movement. (AMA time is July 29)

(Figure 6: Bitcoin STH-NUPL)

STH-NUPL is the same as NUPL mentioned above, but it refers to indicators related to short-term investors instead of long-term investors. From the trading history, the peak value appears when short-term investors enter the green zone. Simply put, this period is when the novice traders are full of happiness, shouting that they make money with Bitcoin and that buying Bitcoin can make them rich, and rushing to buy it. At the beginning of this year, although the market was not bad, most people invested in altcoins, and not everyone wanted to choose Bitcoin.

In my opinion, we may see the bubble burst this year. At that time, investors really need to stay sober, be prepared for market declines, and manage risks well.

PANews: Are you involved in mining? There is a view that "under the strict control of the Chinese government, a large number of mining practitioners have left China, which is a positive adjustment to the market in the long run." What do you think about this? (The biggest drop in the difficulty of Bitcoin mining)

Jaewoo Cho: I used my 1080ti to mine a small amount of Ethereum at home a while ago. I stopped doing it now because it’s too hot. I’m only running the Lightning Network now.

Regarding the issue of China regulating the mining industry, I agree with the opinions of the public. The geographical and political distribution of mining power can be decentralized, and most importantly, the mining cost can be increased. As I said before, if the mining cost increases, it will be good for the price of Bitcoin. Because no one will sell Bitcoin mined at a high price at a low price.

But the mining hash rate has dropped a lot at the moment, so I’m still a little worried. I hope it can recover soon.

PANews: In the TV show "The Man Who Used His Wife's Credit Card", a couple speculated in cryptocurrencies, and their returns plummeted from 400% to -70%. It became a hot topic in major news and the risks of cryptocurrency speculation also became a focus of attention. What suggestions do you have?

Jaewoo Cho: I always emphasize two points. One is long-term reserves. In other words, it is a mechanical method of using the same amount every day or every week. This way, even if it is only for five years, it can be stable.

The second point is to determine the proportion of Bitcoin, altcoins and cash held, and think about it in the long term. 50% Bitcoin, 30% cash and 20% altcoins are better, and of course you can adjust it to a ratio that suits you better. No matter how you arrange it, the most important thing is cash. Because in a volatile market, the existence of cash can be said to be the most solid backing. And the Bitcoin part will be a source of stable income. Although it is impossible to capture the soaring altcoins in this way, it can help everyone achieve peace of mind and stability.

PANews: Currently, the Korean market has begun to strengthen regulation, and many people have become interested in cryptocurrency investment. In this regard, what do you think of the future prospects of the Korean market?

Jaewoo Cho: First of all, compliance with regulations is of course the most important thing for all actions. However, I think it is also important to speak out and call for improvements to relevant restrictions. Therefore, we need to gather the power and wisdom of the crypto industry and dare to speak out to the government.

Of course, it is a good thing that the cryptocurrency industry can be regulated, because it is a recognition given by the state. If it were five years ago, this would not even be dreamed of.

PANews: As far as I know, the South Korean government has stated that virtual assets will be taxed starting next year, but there are also continuous voices of opposition. In your opinion, will the tax be collected as planned? When will the Korean cryptocurrency industry be officially included in government regulation?

Jaewoo Cho: Although the regulatory authorities are less professional in the field of cryptocurrencies, I think that from the moment the taxation is determined, the Korean cryptocurrency industry has been formally brought under government control. On this basis, it would be even better if additional laws on the virtual asset industry could be formulated. 'You know, where there is taxation, there is the guarantee of relevant powers.

PANews: Many mining farms have moved to North America, and the industry says this is good news in the long run from the perspective of hash distribution. However, due to the formation of the North American mining cartel, some people criticize it for moving away from the intrinsic value of Bitcoin decentralization. Do you agree with this statement?

Jaewoo Cho: It is indeed necessary to examine such negative statements. But in my opinion, it would be better if the mining farms were distributed to North America and China's neighboring countries rather than being concentrated in China. (Head picture from Bitcoinist)