05/7 – 05/13
- Total market cap. reached $388.78 bn (a 15.6% decrease), where 7 day transaction volume slumped 11% for top 100 crypto.
- EOS released its EOSIO Dawn 4.0.
- 15 May: BCH to conduct hard fork
- 15 May: ADA to release its 1.2 update
THOUGHTS OF THE WEEK
Upbit, the largest cryptocurrency exchange in Korea, was raided by prosecutors this week on grounds of suspected fraud. Korean authorities allege that Upbit has been selling cryptocurrencies to customers that it didn’t actually hold. This incident led to a huge decline of major cryptocurrencies, particularly EOS and ADA.
From this incident, we observed that the % change in price is inversely related to KRW as % proportion in trading volume for major altcoins, with a correlation of -0.74. When KRW accounted for 94.38% of trading in Upbit, it is not surprising that major altcoins with high % proportions of KRW in their trading volume suffered the most. As noted in our Chart of the Week, the price of EOS and ADA dropped by 17.97% and 15.75% since this Upbit incident, with KRW at the time of the incident accounting for approximately 30% and 55% of their trading volumes respectively. This is followed by QTUM, the price of which dropped by 15.55%, with KRW having accounted for roughly 35% of its total trading volume.
We noted that some major altcoins also slumped in general despite their trading not involving large proportions of KRW. The most notable example being IOTA, the price of which fell by 15.89% to $1.8 following the Upbit incident. However, as IOTA did not involve KRW in its trading volume, we believed the negative price impact on IOTA to be temporary, and its price quickly bounced back reaching $2.01 as of 13 May. We believe IOTA will continue its upward pricing momentum, being further boosted by the official release of Qubic.
We may speculate that if similar crypto exchange crises were to happen in the future, investors may be able to better predict corresponding price movements of major altcoins by paying attention to the main trading currency of the exchange in question, and the proportion of an altcoin’s trade that is carried out in that same currency. For example, a KRW exchange facing an incident may result in a negative price impact on coins largely traded in KRW (e.g. ADA).
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