When bad news comes out, nervous traders with weak hands will sell off their digital currency assets. It happened on Friday, when it was reported that prosecutors raided Upbit offices due to suspicion of fraud. This includes allegations that the crypto exchange platform did not store actual cryptocurrencies on their exchange. According to the prosecutor’s office, “We found some circumstantial evidence that shows Upbit sold a larger amount of crypto coins than it actually owned in the early business phase.” What does this mean for crypto trading?
We are not financial advisors, and this is only our opinion, so be sure to consult with a financial advisor if you are planning to make an investment decision. That said, if you’ve got some extra cash, it would be a good time to buy the dip. Many coins traded on the exchange dropped 5-10% and more, including Bitcoin (BTC), Ethereum (ETH), Ripple (XRP), Bitcoin Cash (BCH) and Litecoin (LTC). In addition, Upbit is the largest market for EOS, where as much as 13% of this coin are traded on the platform according to FXStreet. With a drop of 16% in the price of EOS on Friday, likely due to the activity in South Korea, it might be a great deal for you to consider. If you want to be more conservative, then certainly take a look at BTC, ETH and LTC, too, as they’re traded on a large number of exchanges.
It’s certainly possible that prices may continue to drop, and you should watch the direction of the market before placing an order. But generally when news like this comes out, the market takes a hit, and then it bounces back, every time. Sometimes the bounce happens in a few days, and sometimes the bounce happens after a few months. In the case of Bitcoin, it tanked after peaking around $20,000 USD in December, but then we saw a bounce in early February. It had a nice run, followed by a dip in late March and now it’s consistently been trading above $8,000 since mid-April. Friday’s price is right around $8,600. Compare that to the $1,800 Bitcoin was trading at around this time in 2017, and it should be clear that if you’re patient, it’ll likely work out in your favor.
So, let the news of the raid play out. Prosecutors seized documents and computer files from Upbit, and the next step will be to question Lee Sir-goo, the former Kakao CEO that’s in charge of the exchange today. Government agencies are making examples of companies that they do not believe are playing by the rules. In the US, the SEC continues its probe into ICOs while the CFTC and IRS work to determine the rules for classifying each digital asset.
In Korea, the government continues its efforts to reduce the risk of what it perceives to be illegal activities that are related to this new technology. Yet, in contrast to the FUD that came out in 2017, there clearly is not going to be a ban on crypto trading in Korea anytime soon. Just over a month ago, the Beijing company, Huobi launched an exchange in South Korea. We can expect that the potential void left by this raid on Upbit will create an opportunity for new exchanges to emerge, including some that will cooperate with the Korean government in complying with the local regulations.
Throughout this process, companies that want to be compliant will work with these agencies in order to play by their rules. By following the news, investors can stay one step ahead of any negativity. Do your research on the various exchanges, determine the level of risk that you are most comfortable with, and invest where you feel most comfortable.