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NVT Ratio Signals Overvalued BTCThe network value to transaction (NVT) ratio of Bitcoin, which has been staying at a high level since the beginning of the year, has signaled its overvaluation, according to Yonhap Infomax.However, some argue that this will not necessarily lead to a crypto winter, considering that the nature of Bitcoin as an asset has changed and there is no sign of overheating in other indicators.©Pexels/PixabayPrice and NVT ratio correlationYonhap Infomax found out that the correlation between the NVT ratio and the price of Bitcoin over the past six years is -0.35. A value of 1 represents a completely positive correlation, while a value of -1 represents a completely negative correlation.Extending this period to 2010 makes the correlation close to 0, but during the early years, NVT ratios showed high volatility, shooting up to four digits. Such a high volatility doesn’t suggest much correlation. Until 2021, there was a high correlation of up to -0.44.The NVT ratio is calculated by dividing the market cap by the transacted volume. Conceptually, it is similar to the price-to-earnings ratio for the stock market.In 2017, when the crypto market was bullish, the average Bitcoin NVT ratio was 7.3. This number became 8.7 in 2021 when the market experienced a similar pattern. In retrospect, single-digit NVT ratios usually hint at bullish markets.This year so far, Bitcoin has been relatively overvalued, given that the average NVT ratio is 23.6.BTC price recoveryWhen the crypto market sentiment lost its confidence due to the FTX bankruptcy last year, the price of Bitcoin went down to $15,000. It later recovered to the near $30,000 level. The Bitcoin price once had reached an all-time high in 2021, surpassing $65,000.The years that manifested similar patterns as this year were 2018 and 2019. In those years, the Bitcoin NVT ratio plateaued around 20.Uncertain outlookThe NVT ratio itself could point to a possible crypto winter, but researchers say it’s hard to say.Jang Kyung-pil, a research analyst at crypto data platform Xangle, said that people now consider Bitcoin as a store of value rather than a means of transactions, pointing out that BTC’s market value to realized value (MVRV) ratio has hit the bottom at 0.84 and now reached 1.4. According to Jang, MVRV values under 1 indicate undervaluation and those above 3 indicate overvaluation.Jung Seok-moon, head of the research center at crypto exchange Korbit, said that the current NVT ratio signals BTC overvaluation. He added that the Fed is likely to turn dovish in its monetary policy, which would prompt a strong BTC uptrend.

Chinese authorities are gearing up for a significant amendment to the country's anti-money laundering (AML) regulations, with a specific emphasis on cryptocurrency-related transactions. Growing concerns about cryptoThe move, reported by Chinese business and financial news media outlet Jiemian on Wednesday, comes in response to growing concerns among policymakers in China about the need for heightened scrutiny within the burgeoning crypto industry. This marks the first substantial update to China's AML rules since their introduction in 2007. In 2021, China took a decisive step by imposing a comprehensive ban on cryptocurrency use, which included prohibiting offshore exchanges from offering services and putting a stop to all forms of mining. However, despite these restrictions, mainland users have managed to find avenues to access the crypto market. The upcoming amendment to AML regulations aims to introduce more stringent guidelines to address and mitigate these activities effectively. Prime Minister Li Qiang chaired an executive meeting of the State Council on Jan. 22 to deliberate on the revised AML law. The initial draft of the AML regulations was proposed in 2021. The revised version is set to become law by 2025 after being included in the legislative agenda of the State Council for 2023.Photo by Max van den Oetelaar on UnsplashDigital assets not clearly definedUrgency was stressed in addressing cryptocurrency money laundering at the legal level, as the current laws lack a clear definition of digital assets. Although the revised draft includes measures to prevent digital asset money laundering, concerns were raised about the absence of operational guidance on subsequent actions such as asset seizure, freezing, deduction and confiscation in money laundering cases involving digital assets. Experts noted that there is room for improvement in combating digital asset-related money laundering. China's existing AML law is designed not only to deter money laundering but also to protect fiscal order and combat related crimes. As a country with a deep understanding of money laundering and terrorist financing risks, China is not included in the Financial Action Task Force's (FATF) list of AML-deficient countries. However, a 2019 FATF report suggested that China should focus more on addressing the laundering of crime proceeds and expand its resources for national risk assessment. Circumventing the banDespite the formal ban on cryptocurrency circulation and mining by Chinese authorities, there are still avenues for Chinese nationals to access the digital asset ecosystem. BitMEX founder Arthur Hayes recently indicated that wealthy Chinese individuals have access to banking in Hong Kong, serving as the gateway for mainland China to global capital markets, including the cryptocurrency markets. While many crypto miners left the jurisdiction following the ban in 2021, Chinese companies account for a significant proportion of mining equipment manufacturing. Major exchanges like Binance and OKX have Chinese roots, underscoring the nation's influence in the global crypto landscape. Before the cryptocurrency trading ban in China, trading volumes on yuan-denominated crypto exchanges surpassed those of dollar pairs. As China prepares to fortify its AML regulations, the crypto industry awaits further clarity on how these changes will shape the landscape and influence the conduct of cryptocurrency-related activities within the country.  

Coinone’s recent addition of USDT/KRW trading pair expected to reduce Kimchi premiumCoinone, a major South Korean cryptocurrency exchange, listed USDT, a stablecoin pegged to the US dollar on the platform’s Korean won-denominated market on Thursday (local time). Its listing price was KRW 1,289.Tether Limited, the company behind USDT, asserts that their stablecoin is “backed 100% by Tether’s reserves.” These reserves comprise a variety of real-world assets such as U.S. Treasuries, overnight reverse repurchase agreements, corporate bonds and precious metals. According to CoinMarketCap, USDT’s market capitalization stands at $89 billion, ranking it third in the cryptocurrency market, just behind Bitcoin and Ethereum.Photo by DrawKit Illustrations on UnsplashFirst to list USDT/KRW trading pairDespite the significance of USDT in the cryptocurrency market, Korean exchange users have faced the limitation of not being able to purchase the stablecoin using Korean won, although these exchanges did offer markets denominated in USDT. This limitation has prompted Koreans to turn to foreign cryptocurrency services for acquiring USDT. With Coinone’s latest move, the platform has become the first to facilitate USDT/KRW trading among the nation’s five fiat-to-crypto Korean exchanges — Upbit, Bithumb, Coinone, Korbit and Gopax.Regarding this development, Kwon O-hoon, Managing Partner at the law firm Cha and Kwon, told local news outlet Decenter that there seem to be no particular legal concerns with the crypto exchange’s engagement in USDT transactions. This perspective stems from the absence of stablecoin regulations in the country.Reducing the Kimchi premiumAccording to Decenter, crypto experts anticipate that the introduction of USDT/KRW trading will help in reducing the Kimchi premium, a term referring to the discrepancy in cryptocurrency prices on South Korean exchanges compared to those in foreign exchanges.For instance, according to data from CoinNess, the average price of BTC on Korean exchanges is around KRW 51,177,250. This is about 2.34% higher than its average price on foreign exchanges, which stands at KRW 50,005,909. This difference means that users on Korean exchanges need to pay an additional KRW 1,171,340 to buy one BTC, compared to what they would pay on international platforms.However, the newly added trading pair will streamline transactions between exchanges, making it simpler for investors to engage in arbitrage. This ease of transfer is expected to lead to more balanced pricing across different markets, reducing the Kimchi premium.In light of this development, Jo Dong-hyeon, CEO of blockchain company Undefined Labs, said various institutions and blockchain projects will likely find USDT increasingly useful as a store of value, given USDT facilitates easy transfers between different exchanges.