The cryptocurrency market is suddenly awash in red. Within 24 hours of CoinMarketCap, a leading global index of digital currency prices, adjusting its listed data by removing a group of Korean cryptocurrency exchanges from its price calculations, total market capitalization crashed by more than $150 billion. All the top 10 cryptocurrencies were showing drops of anywhere from 1.8% to 22% on the website earlier this morning.
Yesterday, CoinMarketCap tweeted that "This morning we excluded some Korean exchanges in price calculations due to the extreme divergence in prices from the rest of the world and limited arbitrage opportunity. We are working on better tools to provide users with the averages that are most relevant to them." Since the trading prices of most virtual currencies are much higher on South Korean exchanges like Bithumb, Coinone and Korbit-reportedly up to 30% higher due to high local demand-compared to other countries, CoinMarketCap's revised prices showed a sharp, sudden drop.
This, in turn, triggered off panic selling by investors unaware of the reason behind the crypto price decline displayed on the website. Many probably thought that this was the long-predicted bubble burst. As a result, the cryptocurrency market that was collectively worth $835.6 billion at 11.07 UTC, reportedly nosedived to a low of $668.7 billion, down 20% in one day. As news of the real reason for the price correction spread, the market started to slowly recover lost ground and the market cap currently stands at $760 billion.
CoinMarketCap's decision to revise its price calculations comes in the heels of a Korean crackdown on crypto trading. In late December, authorities in South Korea, the world's third largest market for cryptocurrencies after the US and Japan, announced that they were planning to ban opening anonymous cryptocurrency accounts and introduce new legislation enabling regulators to close exchanges if needed. According to Investopedia, the world's largest financial education website, the authorities have also recently announced that they were inspecting six of the country's largest financial institutions that offer virtual currency accounts to institutions for compliance with anti-money laundering laws. This was reportedly the trigger for the website's sudden move.
The worst affected of all digital currencies was Ripple's XRP while Ethereum took the smallest hit. Just four days ago, Ripple had fallen by more than 25% after Coinbase, a cryptocurrency exchange, squashed rumours about integrating it. So the CoinMarketCap revision was a double whammy, reportedly wiping out $20 billion from its market cap. Digital currency king Bitcoin, meanwhile, is up 9% from a low of $14,208.20 yesterday.
Apart from the heartburn caused, the recent panic underscores the inherent instability of the crypto market. Investors looking to make a quick profit are advised to proceed with caution.