South Korea and Japan, the third and fourth largest Bitcoin exchange markets, are no longer showing Bitcoin price premiums. On May 25, Cointelegraph reported that Bitcoin price surpassed $4,500 in South Korea as the market’s premium reached an extreme. Bitcoin was traded within the South Korean Bitcoin exchange market for as much as five mln Korean won, the highest bid in the global Bitcoin exchange market’s history. At the time, the global average Bitcoin price barely reached $2,600 prior to a major market correction which ultimately led to a $700 decline. However, as analysts including Max Keiser noted, Bitcoin price always recovers beyond its initial peak and at the time of reporting, Bitcoin price is stable at around $2,900.
Strict anti-money laundering (AML) policies and capital controls
When evaluating premiums in markets such as Japan and South Korea, it is important to consider the strict anti-money laundering (AML) policies and capital controls both countries have implemented in the past. Japan, in particular, significantly strengthened its AML policies as the Act on Prevention of Transfer of Criminal Proceeds came into effect on October 1, 2016. Global law firm Hogan Lovells, which houses over 2,500 lawyers, explained the changes made by the Act on Prevention of Transfer of Criminal Proceeds in its report:
“The 2016 Amendments are particularly relevant for banks and other financial institutions operating in Japan as it sets out revisions in relation to how certain institutions should determine suspicious transactions, verify contracts with foreign correspondent banks and implement additional in-house AML measures.”
Similar AML policies and capital controls currently implemented in South Korea made it difficult for traders and investors in both countries to take advantage of arbitrage opportunities. Hence, even when there was a 30 percent premium in South Korean and Japanese Bitcoin exchange markets, traders found it extremely difficult to profit from the premium rates. Even if they found a way to do it, large amounts of transfers would be immediately flagged by strict AML systems.
Factors behind the extreme premium rates
South Korea and Japan’s extreme premium rates did not dematerialize overnight. It began with the stabilization of the Chinese market and the resumption of withdrawals led by the big three Bitcoin exchanges in China - Huobi, OKCoin and BTCC. As the global market stabilized and the Chinese Bitcoin exchange market recovered, premiums started to decrease. Chinese exchanges, which used to process Bitcoin trades around 25 percent lower than the global average price, began to process trades at a value higher than the global average Bitcoin price. During that time, liquidity in the Japanese and South Korean markets also increased drastically. Some of the largest companies in Japan, including the multi-billion dollar internet conglomerate GMO, opened a Bitcoin exchange to address the rapidly increasing demand for Bitcoin and South Korean exchanges also began to focus on providing higher liquidity toward traders. Ultimately, the recovery of the Chinese market acted as a catalyst for global Bitcoin exchange market stabilization and standardization.
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Price Analysis: BTC, ETH, ETC And LTC
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BTC/USD 09.06.2017
Bitcoin continues to surprise. After experiencing huge growth in May, traders thought that consolidation awaits BTC/USD. Potential support levels of $2,300, $2,500, $2,700 looked really good. However, there was no potential level of growth being shown, and the price moved to historic highs. Right now, we see the following picture:
- $2,600 area may be a strong support level.
- Volatility decrease forecasts have proved themselves wrong.
- News background is flat.
Currently, the price is in the zone of a potentially high support level. Buys from this level might be a good idea for intraday speculators. If the support level proves itself strong, it’s a signal for bulls. Therefore, trades with $2,800 goals will have a decent expectation value. Right now, a level retest is just underway. If the $2,600 level does not remain, then one should wait for the next price bounce and a shaping of new support zones. The main rule is to exclude short positions for BTC/USD. The pair is under serious pressure from the uptrend, so deals against the trend are a bad decision. One should also remember that volatility remains. Always wait for retests to have a more precise signal for position entry.
ETH/USD 09.06.2017
The $200 resistance zone appeared to be great. We saw new highs and the ETH/USD pair has seen a decent decrease in volatility in recent days. Currently, there are three possible scenarios. In the order of probability:
- $250 is a strong support zone. It will be a good entry point, with goals of $280 and higher.
- A continuing decrease in volatility and the formation of a $240-$260 channel.
- The correction and formation of a $220 support zone, or downgrade to a more global level of $200.
The most likely turn of events is the formation of new highs (reasons: global uptrend, news, which might change the picture). Also, mind that on the market with such a super growth there are no short positions. Look for entry points with longs and always use stops. And follow Ethereum news updates.
LTC/USD 09.06.2017
LTC cheers up with stability. The support zone will be $23 and $36 - a good resistance zone but keep in mind possible huge volatility. Despite the decent width of the $23-$26 channel, it has very strong support and resistance zones. The price is trading in the middle of the channel, and there are now signals for deals. For position opening, one should wait for a price at either side of the channel. Currently, the most likely scenario are resistance zone tests. Hitting one of the zones is unlikely. For the price to leave the channel, strong fundamental news is required or a strong decrease of the whole Blockchain market.
ETC/USD 09.06.2017
ETC/USD has not had strong movements since the beginning of the month. Right now, price trades in the $15.5-$18.7 range. Usually, such consolidation happens before fast growth. The resistance zone is around $17. So if this level gets hit and fixed, most probably we will see maximum tests for this pair. It can also be mentioned for ETC/USD that many fundamental factors drive the growth. Mind the following points:
- ETC will have a limited emission of 210 mln tokens.
- Interest from Chinese investors.
- Strong community.
- It’s still Ethereum. Just another branch of it.