The price of bitcoin dropped as much as 20 percent early Tuesday after regulators in South Korea repeated warnings they may ban cryptocurrency trading.
Cryptocurrencies across the board took a hit, with all of the top 100 digital coins listed by CoinMarketCap dropping in value.
More than $160 billion was wiped off the value of all cryptocurrencies listed by the website in the space of 10 hours, highlighting the remarkable volatility in the market.
Markets started to rebound by 7 a.m. ET Tuesday, but bitcoin’s price was still down 12 percent down from 24 hours ago, 20 percent down from a week ago, and down 40 percent from an all-time high of $20,000 a month ago.
Ethereum was down more than 12 percent, while ripple, a cryptocurrency that has increased in value 30,000 percent during 2017, was down 18 percent — an almost 40 percent drop in the last seven days.
In an interview with TBS radio, South Korean Finance Minister Kim Dong-yeon said shutting down cryptocurrency exchanges is still an option, but such measures would need “serious” discussion at the government level.
This gave traders hope Seoul would not completely ban trading but rather introduce more regulation.
South Korea is a major hub for cryptocurrency trading globally. However, buyers of bitcoin in Seoul have typically paid a premium compared to the rest of the global market. Analysts suggest the drop in South Korea’s trading volume could indicate investors have become frustrated with inflated prices.
“The volumes have been declining steadily in both Japan and South Korea over the last few days,” Mati Greenspan, an analyst at trading platform eToro, told Business Insider.
“This morning, the combined volume from these two top cryptotrading countries dropped below 30 percent. Looks like they're tired of overpaying for cryptos and waiting for the market to even out."
Bitcoin’s futures contracts are currently trading at a discount, which is also weighing down the currency.
Besides South Korea threatening a ban, the Chinese government has taken a number of steps to limit its economy’s exposure to digital currencies, banning initial coin offerings, shutting down local exchanges, and mulling a ban on bitcoin mining operations.
The light-touch regulation that has allowed the cryptocurrency to boom could soon be replaced by much harsher restrictions across the globe, leading some analysts to predict an even bigger drop in value.
Investors “should be prepared to lose all their money” in bitcoin, Steven Maijoor, the chairman of the European Securities and Markets Authority, told Bloomberg. “It has an extremely volatile value, which undermines its use as a currency. It’s also not broadly accepted.”