First Mover Asia: Regulatory Attention on Terra Could Change South Korean Trading Environment; Bitcoin Goes Sideways

Insights: In the aftermath of the Terra implosion, South Korea's crypto trading environment could change. Here's what might happen.

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Bitcoin and other major cryptocurrencies traveled sideways for the second consecutive day.

The largest cryptocurrency by market capitalization was recently trading at about $29,700, up slightly and about where it stood 24 and 48 hours earlier. 

Ether, the second-largest crypto by market cap, was down over a percentage point, still trading a little below the $2,000 level it has held much of this week. 

Other cryptos were mixed, some rising a little and others falling, although metaverse tokens MANA and SAND had a good day with SAND rising over 7% at one point. TRX was also recently up more than 5%.

A number of crypto markets analysts say that bitcoin will remain in the $28,500 to $30,500 range it has held since the collapse of the terraUSD (UST stablecoin two weeks ago until investors have clarity in how the current uncertain environment of high inflation and sagging economic indicators will resolve itself. 

According to minutes, released Wednesday, of their last meeting, Federal Reserve officials indicated that they would have to raise interest rates by 0.5% in each of their next two meetings. 

The U.S. central bank hiked the rate by the same increment on May 4, but has continued to face criticism for not adopting more hawkish monetary remedies sooner to tame rising prices.

Stocks did better than they have for much of the past few months with the tech-heavy Nasdaq rising 1.5% and the S&P 500 and Dow Jones Industrial Average increasing more moderately. 

Cryptos and equities have suffered as investors have shied away from riskier assets. Gold and yields on 10-year Treasuries sank.

Brent crude oil, a measure of energy market prices, hovered over $111 per barrel, and with the summer U.S. travel season approaching, demand for oil is expected to be strong.

In an interview with CoinDesk TV's First Mover program Wednesday, Michael Sonnenshein, the CEO of crypto asset manager Grayscale Investments, a subsidiary of CoinDesk parent company Digital Currency Group, noted the "selling pressure" and volatility in digital assets but also that the same trends had infected other investment classes.

"Whether it's tech, crypto or really anything, I can't think of many things that had been sheltered from this recent pullback," Sonnenshein said. "There have also been events like Terra that have led to additional selling pressure."

The implosion of Terra’s U.S. dollar-pegged stablecoin terraUSD (UST) could change South Korea’s frenzied crypto trading market as regulators pay more attention to the situation, two founders of prominent crypto-related organizations said.

The country, a hotbed of trading activity, could tighten restrictions on listings and make it difficult for foreign tokens to list on Korean exchanges, discouraging projects from even trying.

“There are a few elements that might get impacted, especially with the listing part,” Doo Wan Nam, a South Korean who leads growth at MakerDAO and is the founder of crypto venture fund StableNode, told CoinDesk.

UST lost its tie earlier this month as investors sold it for other U.S. dollar-pegged stablecoins, including tether (USDT), in the absence of adequate liquidity, causing UST's price to fall to as low as 7 cents. 

The luna (LUNA) token that supports the Terra ecosystem lost 99.7% of its value following UST’s failure and Terra-based decentralized finance (DeFi) applications dropped over $28 billion in locked value.

Suicide helplines flooded Terra-centric community forums in the days following the implosion. 

At the center of the drama is Terraform Labs, the Singapore-based company behind Terra, and its Korean founder Do Kwon. 

Kwon is infamous for responding to critics with condescension and even calling for the death of other stablecoin projects.

As per local reports, regulators could tighten listing norms for crypto exchanges in the country as they try to protect the everyday investor from a Terra-like repeat. 

This could, however, lead to the limitations on how coins are listed and offered to local investors.

Doo noted the potential addition of “safeguards on exchanges” to ensure they meet certain requirements, including “white paper and regular disclosers (updates) from listed coins,” adding, “We aren't sure whether they will implement such but, if so, it would put a burden on bothKorean exchanges and also listed coins.”

Decentralized finance-focused tokens from foreign companies may struggle to enter the Korean market altogether: “Many foreign-based coins, especially DeFi, might be difficult to list on Korean exchanges as such compliance would be difficult to enforce,” Doo explained.

Korea remains one of the world’s largest crypto trading regions, with $2.5 billion worth of tokens traded in the past 24 hours within the country's exchanges alone.

Meanwhile, some market observers say retail traders in Korea – known for their aggressive futures and altcoin trading – could hold off from trading risky assets.

Bitcoin (BTC) is in a consolidation phase, which is defined by a tight price range with low trading volume. 

So far, the cryptocurrency has struggled to make a decisive move above $30,000, which is near the top of its recent range.

BTC is up by 3% over the past 24 hours, and momentum has improved over the past week. That means buyers could remain active above the $27,500 support level.

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