South Korean police raid Bitcoin exchange again, cryptocurrency market in mourning

The South Korean government is reportedly stepping up its crackdown on domestic cryptocurrency exchanges.

According to foreign media reports, cryptocurrency exchanges Bithumb and Coinone were raided by police and tax authorities on January 11. Bithumb and Coinone are the two largest cryptocurrency exchanges in South Korea, and tax authorities visited their offices on the grounds of investigating suspected tax evasion.

A Coinone staff member said that local police investigated its office in 2017 and believed that the activities engaged in by the exchange were a form of gambling.

It is understood that Bitthumb representatives have met with South Korea’s tax authorities. The representative said that the meeting with the tax authorities was true, but the police did not conduct a surprise investigation on the exchange.

In addition, South Korean news media SBS reported that South Korea's judicial department is preparing legislation to pave the way for the government to close cryptocurrency exchanges across the country. The judicial department will pass relevant bills to make cryptocurrency brokerage business illegal, thereby completely closing cryptocurrency exchanges. It is understood that the South Korean judicial department will hold a comprehensive discussion on the legislation to restrict cryptocurrency this week and announce its implementation in the near future.

The report is indicative of the increasing scrutiny of cryptocurrency exchanges by South Korean regulators. Earlier this week, South Korea’s Financial Intelligence Unit and Financial Regulatory Authority announced that they would inspect six unnamed banks to check their compliance with anti-money laundering regulations and whether they have adequate information on their customers.

Since December 2017, as the scale of cryptocurrency transactions continues to expand, the South Korean government announced that it will adopt stricter regulatory measures and ban anonymous transactions.

Prices on South Korean cryptocurrency exchanges have been consistently higher than in other markets. Bitcoin was trading at $17,169.65 on local exchange Bithumb, 31 percent higher than the CoinDesk average.

Earlier this week, trading platform CoinMarketCap caused controversy among investors when it removed quotes from a South Korean bitcoin exchange without prior warning.

But CoinMarketCap said the reason for doing so is that the quotes of Korean exchanges are very different from those in other parts of the world, arbitrage opportunities are limited, and it is working on better tools to provide users with the average value that is most relevant to them.

South Korea is understood to be one of the largest markets for Bitcoin and Ethereum. According to statistics from industry website CryptoCompare, more than 10% of Ethereum is traded in Korean won, which is second only to the US dollar among all legal currencies traded. At the same time, 5% of Bitcoin transactions are also in Korean won.

After the news was announced, Bitcoin-related stocks were hit hard in South Korea. Omnitel, which has a Bitcoin remittance business, plummeted 30%, Vidente fell 29.96%, Digital Optics fell 13.7%, and KPM Technology fell 5.48%.

At the same time, the cryptocurrency market was also in mourning, with cryptocurrencies generally plummeting and the price of Bitcoin on multiple platforms plummeting by nearly 10%.

Technical Analysis

Bitcoin has been relatively weak in recent days, falling for three consecutive days and continuing its downward trend today.

The 20-day moving average above began to turn downward slightly, and the 15,300 line is the most direct pressure above.

Currently, the most direct support below is around $12,500 (the low on December 25). If this position is broken, the low of December 22 at $10,775.92 will be tested again. This position is also the current position of the 60-day moving average, and it is unlikely to fall below it in a short time.