Scandals and regulation moved prices in cryptocurrency markets during the last 24 hours. News reports about the CFTC’s subpoena for Bitfinex and Tether tanked prices for bitcoin and other cryptocurrencies in the hours following its release. (See also: Tether And Bitfinex Subpoenaed By CFTC).

Bitcoin’s price fell by as much as 30% and traded at levels below $10,000. The overall valuation of cryptocurrency markets also crashed to $500 billion last night. But pronouncements by South Korea’s finance minister regarding cryptocurrency regulation reversed the decline.

At 14:14 UTC, the price of a single bitcoin was $10,279, up 2.44% from 24 hours ago. While the top 10 most-traded cryptocurrencies were mostly in the red, they had stanched the extent of their declines as of this writing.

Ripple cousin Stellar was the only exception, and edged upwards, trading at $0.54, an increase of 2.46% from 24 hours ago. The overall market capitalization for digital currencies was $511.8 billion at 14:24 UTC. 

Tether Effect On Crypto Markets

As expected, the CFTC’s (Commodity Futures Trading Commission) subpoena to Tether and Bitfinex has generated much discussion within the cryptocurrency community. There are those who believe that a collapse in its prices will crash crypto markets. According to this narrative, Tether is being used to artificially prop up bitcoin prices. The domino effect of a fall in its prices is expected to bring down other coins.

Others, however, cast Tether as a lone ranger whose fall will not have an effect on other virtual currencies. For example, Litecoin founder Charlie Lee tweeted that Tether was “just like any other altcoin” and its price will crash to zero, once the truth comes out. (See also: Tether and Bitfinex Crypto Companies Subpoenaed by U.S. Regulators.)

That, of course, depends on what the truth is. Even as charges and countercharges are traded, little is known about the case for or against Tether.

There are two claims against Tether. The first one is that it issued currency to stem bitcoin’s decline last year. A cursory glance at price charts for both currencies seems to provide credibility to this theory. For example, price declines for bitcoin on December 10 and November 13 were accompanied by a surge in the market capitalization for Tether. 

There is also the charge that Tether is not backed by actual dollars, as it claims. An audit last year was inconclusive and hedged in ambiguous wording. Meanwhile, the coin is still trading at parity with the U.S. dollar. But trading volumes and market cap, which is simply the number of coins multiplied by price, have surged. The latter metric suggests an increase in the number of Tether coins in circulation.     

Will They Or Won’t They?   

South Korea’s Finance Minister Kim Dong-Yeon allayed market fears this morning by stating that his government had “no intentions” of banning or suppressing cryptocurrency markets. “Regulating comments is (the government’s) immediate task,” he said.

Meanwhile, government authorities uncovered illegal foreign exchange trading using cryptocurrencies worth $472.3 million. Some of the transactions were conducted by illegal foreign exchange agencies, which transferred funds out of the country using digital wallets. The country has already ended anonymous trading on its exchanges. 

South Korea accounts for the third biggest trading volumes in cryptocurrencies and has a major effect on their prices. (See also: Why Is South Korea So Important To Cryptocurrency Prices?) Comments by government officials earlier this month resulted in a deep swoon for crypto markets.

But regulation might be the start of good things for cryptocurrencies there, as it will draw in more investors to the market. A banking consortium in South Korea is also testing the use of Ripple’s technology to increase efficiency and reduce transaction fees for cross-border transfers with Japan. 

Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns small amounts of bitcoin.