One of the central tenets of the Bitcoin bull thesis (and the bull thesis around cryptocurrencies in general) is the idea that the space is largely immune to government crackdowns. After all, what good is an anonymous, decentralized system if the powers that be can simply regulate it out of existence?

Government interference in cryptocurrencies is something of a bitter-sweet proposition for crypto bulls. It all at once validates and invalidates the underlying thesis. Government intervention “proves” the need for a means of exchange that’s outside of government control, but successful government intervention also “proves” that the effort to create a viable means of exchange that challenges central banks’ monopoly on currencies was doomed from the word go.

As such, news like what we got out of South Korea on Thursday creates a palpable sense of cognitive dissonance in the crypto community. Overnight, South Korea said it’s considering shuttering at least some cryptocurrency exchanges as part of an effort to do away with what some see as dangerous speculation.

“South Korea has been ground zero for a global surge in interest in bitcoin and other digital currencies as prices surged this year,” Bloomberg writes, adding that “while there’s no immediate indication Asia’s No. 4 economy will shutter exchanges that have accounted by some measures for more than a fifth of global trading, the news is a warning as regulators the world over express concerns about private digital currencies.”

Here are the bullet points from a statement by the Office for Government Policy Coordination:

Government to take proper measures swiftly and firmly while monitoring the trend of cryptocurrency speculation

Govt to require real-name on cryptocurrency transactions, while banning banks’ offering of virtual accounts to cryptocurrency exchanges

Govt to prohibit banks’ offering of payment and settlement service to unqualified exchanges

Govt to strengthen banks’ duty of anti-money laundering on cryptocurrency exchanges

Govt to crackdown on cryptocurrency-related crimes and severely punish them

Got that? The news hit around 9:30 ET on Wednesday evening and the reaction was instantaneous:

Other digital currencies fell as well and so far have not recovered from the swoon:

I think it’s important to understand why regulators are starting to get concerned about this. There’s a tendency for crypto bulls to want to couch everything in terms of a conspiracy by authorities and the establishment who are, according to crypto enthusiasts, facing an existential crisis.

That may be true one day, but that day is not today. For now, what regulators are concerned about is the prospect that a collapse in these “assets” will deliver a devastating blow to retail investor sentiment. That could have knock-on implications for the real economy. “Regulators not only in Asia but globally are going to start addressing this fact because I don’t think they’ve actually come to terms with what the absolute downside of a complete drop in crypto means for the economy,” Oanda’s Stephen Innes said on Thursday.

Right. The only problem is that now it’s too late. A collapse from say, $2,000 to $200 might have been manageable. But what are the implications for retail sentiment of a collapse from $20,000 to $200? It’s hard to know. And the cruel irony is that any steps taken to keep the situation from getting more acute are almost bound to increase the chances of a collapse.

We’ll leave you with the heatmap: