First Mover Asia: Tailwinds for South Korea's Crypto Industry; Bitcoin, Ether Plunge

The report earlier this week of SK Group's $1.6 billion investment over the next three years on semiconductors and blockchain follows a presidential campaign that made crypto-friendly policies an important issue; major altcoins also decline.

AccessTimeIconMar 31, 2022 at 11:03 p.m. UTC
Updated Apr 1, 2022 at 2:21 p.m. UTC

Shaurya is an analyst/editor for CoinDesk's markets team in Asia.

Damanick was a crypto market analyst at CoinDesk where he wrote the daily Market Wrap and provided technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also a portfolio strategist and does not invest in digital assets.

James Rubin is CoinDesk's U.S. news editor based on the West Coast.

Good morning. Here’s what’s happening:

Prices: Bitcoin and other major cryptocurrencies decline.

Insights: The South Korean crypto industry has had some good news lately.

Technician's take: BTC is declining from overbought levels; support at $43K.

Catch the latest episodes of CoinDesk TV for insightful interviews with crypto industry leaders and analysis. And sign up for First Mover, our daily newsletter putting the latest moves in crypto markets in context.

Prices

Bitcoin (BTC): $45,808 -2.7%

Ether (ETH): $3,292 -2.7%

Top Gainers

Asset Ticker Returns Sector
Solana SOL +3.2% Smart Contract Platform
Bitcoin Cash BCH +1.3% Currency
Algorand ALGO +0.7% Smart Contract Platform

Top Losers

Asset Ticker Returns Sector
Filecoin FIL −5.1% Computing
Internet Computer ICP −5.1% Computing
Litecoin LTC −4.9% Currency

Bitcoin, other major cryptos plunge

Bitcoin and other major cryptocurrencies plunged on Thursday amid worsening inflation numbers and a vote by the European Union on crypto legislation that the industry viewed unfavorably.

The largest cryptocurrency by market capitalization was recently trading at under $46,00, a more than 2% drop over the past 24 hours. Ether, the second-largest crypto by market cap, was similarly off for the same period and changing hands at about $3,300. A number of prominent altcoins were faring even worse, suggesting lessened risk appetite among investors. Meme coins DOGE and SHIB were recently off about 3% and 4.5% respectively.

Major cryptos' performances dovetailed with those of equity markets. The tech-heavy Nasdaq, S&P 500 and Dow Jones Industrial Average were all down 1.5%. Traditional safe havens such as gold and the U.S. dollar rose, while the 10-year Treasury yield continued to decline from Tuesday's high of 2.5%, as CoinDesk reported.

The U.S. central bank's preferred inflation gauge, the Personal Consumption Expenditures price index (PCE), showed annual inflation rose 6.4% in February, the Labor Department's Bureau of Economic Analysis reported Thursday. The inflation rate accelerated from the 6% clip reported a month ago. The February pace was the highest since 1982.

Some crypto traders watch inflation readings closely because the bitcoin (BTC) market sometimes moves after economic indicators are released. Some investors hold bitcoin as a protection against inflation. The report also showed that consumer spending slowed to 0.2%, from 2.7% in January. Bitcoin at least initially did not react to the news.

European Union lawmakers voted in favor of controversial measures to outlaw anonymous crypto transactions, a move the industry said would stifle innovation and invade privacy. The proposals are intended to extend anti-money laundering (AML) requirements that apply to conventional payments over EUR 1,000 (US$1,114) to the crypto sector. They also scrap the floor for crypto payments, so payers and recipients of even the smallest crypto transactions would need to be identified, including for transactions with unhosted or self-hosted wallets.

Meanwhile, lawmakers worldwide continued to look for ways to protect consumers from further increases in energy prices stemming from Russia's invasion of Ukraine. On Thursday, the Biden administration said it was considering the release of about 180 million barrels of oil over the next six months from the U.S.'s reserves at a rate of one million barrels per day. The price of Brent crude oil, a frequently watched measure of energy prices, was recently selling at about $105 per barrel, down about 1%.

Markets

S&P 500: 4,530 -1.5%

DJIA: 34,678 -1.5%

Nasdaq: 14,420 -1.5%

Gold: $1,937 +0.1%

Insights

Crypto in South Korea has enjoyed a tailwind lately.

Earlier this week, The Korean Herald reported that SK Square, the investment arm of South Korean conglomerate SK Group, would spend 2 trillion won (US$1.6 billion) in the next three years on semiconductors and blockchain.

“This will mark the first year when SK Square creates new shareholder value by investing in chips and blockchain, the fields that we are familiar with, and we see a high growth potential,” Park Jung-ho, CEO and vice chairman of SK Square, told The Korean Herald on Monday.

Seoul-based SK, which has 95 separate companies in chemicals, logistics, energy and materials, among other sectors, has been looking to broaden its portfolio. It is South Korea's third-largest conglomerate. The interest of a so-called chaebol reflects South Korean investors' and entrepreneurs' surging interest in crypto.

The firm plans to introduce its own token before the end of the year, according to a report last week by the Korea Economic Daily last week. SK Square, has set up a blockchain task force that is responsible for the project.

The token would be the first of its kind launched by any company under the purview of South Korea's top 10 conglomerates. The cryptocurrency will be aimed at integrating virtual economies across the group's businesses, the Economic Daily reported.

SK Square is also the largest shareholder of SK Hynix, the world's second-largest memory chipmaker after Samsung. In November 2021, SK Telecom spent KRW 87.3 billion acquire a 35% stake in crypto exchange Korbit.

SK Group's most recent initiative follows close behind the election of one of two presidential candidates who promoted crypto-friendly proposals in an effort to win younger voters. Yoon Suk-yeol, the conservative candidate who won the election, said he would take legal measures to confiscate crypto profits gained through illegitimate means and return them to the victims.

***

India's passage of a finance bill with high taxes will hinder the fledgling industry's innovation and growth, the bill's opponents say.

“Treating profits and losses of each market pair separately” will discourage crypto participation and throttle the industry's growth,” said Nischal Shetty, CEO of crypto exchange WazirX, in a statement. “It’s very unfortunate and we urge the government to reconsider this.”

The crypto measures impose a daunting 30% capital gains tax on crypto transactions and a 1% tax deducted at source (TDS) with no offsetting losses. Industry advocates had hoped to convince lawmakers to limit at least the source tax.


Technician's take

CoinDesk - Unknown

BTC daily price chart shows support/resistance, with RSI below. (Damanick Dantes/CoinDesk, TradingView)

Bitcoin (BTC) is in pullback mode after sellers responded to resistance at $48,000. The cryptocurrency could find support at $43,000 into the Asia trading day, which could stabilize the down move.

The relative strength index (RSI) on the daily chart is declining from overbought levels, which typically precede pullbacks in price. On the weekly chart, however, the RSI is neutral with positive momentum readings. That means buyers could remain active at lower support levels.

Still, BTC is attempting to break below a two-week long uptrend, similar to what occurred in early February, which preceded a brief price drop.

For now, buyers will need to maintain the breakout above $45,000 to yield an upside target toward $50,966.

Important events

Miami NFT Week: Speakers include Mark Cuban and Miami Mayor Francis Suarez

8:30 a.m. HKT/SGT(12:30 a.m. UTC): Jibun (Japan) Bank manufacturing PMI (March)

9:45 a.m. HKT/SGT(1:45 a.m. UTC): Caixin (China) manufacturing PMI (March)

CoinDesk TV

In case you missed it, here is the most recent episode of "First Mover" on CoinDesk TV:

Hackers stole $625 million worth of USDC and ether from the Ronin Network and then used centralized exchanges to deposit thousands in ETH. Adam Darrah of ZeroFox joined "First Mover" and shared his analysis on what may be the biggest hack in crypto history. Mauricio Di Bartolomeo of Ledn provided his crypto markets analysis. Plus, Snoop Dogg's son, and crypto entrepreneur, Cordell Broadus explained their latest comic book NFT collection.

Headlines

Shiba Inu's Metaverse Will Feature More Than 100K Land Plots: Developers have decided to use Ethereum's native cryptocurrency ether as a land pricing token.

Crypto Industry Mobilizes Against Proposed EU Transparency Rules: Crypto advocates were able to sway lawmakers against a provision that could have effectively banned bitcoin in the European Union. Can they do it again?

Fed’s Preferred Inflation Gauge Up 6.4% in February to Four-Decade High: Bitcoin remained roughly flat after the release of the Labor Department's report.

Can Avalanche Win Over Wall Street and 'Degens' Alike?: At the inaugural Avalanche Summit in Barcelona, Spain, the speedy Ethereum alternative is looking to court users onto its subnets.

How a Post-Merge Ethereum Could Attract Institutional Investment: Ethereum’s staking derivatives offer many of the qualities institutions look for in investments.

Longer reads

Chris Larsen’s Plan to Greenify Bitcoin: Risky, Impractical and Maybe Nonsensical: As he strides away from the wreckage of Ripple, bags full to bursting, Larsen thinks he knows what’s best for the coin he failed to replace.

Said and heard

"Now, Europe is seeking new sources of natural gas to replace Russian imports, which account for 38% of the gas imported into the European Union. In addition to Qatar, European nations are talking with gas producers in Angola, Algeria, Libya and the U.S., according to officials in these countries." (The Wall Street Journal) ... "We are preparing a full exit from fossil energy coming from Russia, starting with oil - but without exporting our energy crisis to other countries. We need to think globally, invest in #RenewableEnergies worldwide & build energy partnerships." (German Foreign Office) ... "Modern know-your-customer/anti-money laundering (KYC/AML) regulations are equivalent to financial bloodletting today: They do little good and may cause a lot of harm. Yet, whether we like it or not, the KYC/AML nightmare is coming to crypto." (CoinDesk contributor Boaz Sobrado) ... "Ethereum could have been less complex, [Vitalik] Buterin writes. Its virtual machine could have used existing code rather than a bespoke solution. Its developers could have gone with a crude version of proof-of-stake (the consensus algorithm that will eventually secure Ethereum) that existed in 2013. Ethereum could have been “more Bitcoin-like,” Buterin said, referencing that first blockchain, which aims to do one thing well – serve as a global, peer-to-peer settlements layer denominated in a secure, digital bearer-asset, BTC." (CoinDesk Assistant Opinion Editor Daniel Kuhn)

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CoinDesk - Unknown

Shaurya is an analyst/editor for CoinDesk's markets team in Asia.

CoinDesk - Unknown

Damanick was a crypto market analyst at CoinDesk where he wrote the daily Market Wrap and provided technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also a portfolio strategist and does not invest in digital assets.

CoinDesk - Unknown

James Rubin is CoinDesk's U.S. news editor based on the West Coast.

CoinDesk - Unknown

Shaurya is an analyst/editor for CoinDesk's markets team in Asia.

CoinDesk - Unknown

Damanick was a crypto market analyst at CoinDesk where he wrote the daily Market Wrap and provided technical analysis. He is a Chartered Market Technician designation holder and member of the CMT Association. Damanick is also a portfolio strategist and does not invest in digital assets.

CoinDesk - Unknown

James Rubin is CoinDesk's U.S. news editor based on the West Coast.

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