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Crypto Surpasses Stocks in South Korean Trading as Investors Seek Risk Exposure
- Following a brief martial law stint by President Yoon, South Koreans increasingly turned to cryptocurrencies over traditional stocks.
- Between November 5 and 28, daily crypto trading volumes averaged US$9.4 billion, surpassing the Kospi’s US$7 billion.
- Political instability may further influence market dynamics, with significant impact potential on heavily traded cryptocurrencies like XRP in South Korea.
The chaos for financial markets following the brief declaration of martial law in South Korea was short-lived, it seems. Not only that, but it appears South Koreans are flocking to crypto.
This follows surprise events on Tuesday when President Yoon Suk Yeol unexpectedly declared martial law but revoked it only six hours later.
He explained that this was in response to the opposition’s inactivity to threats from North Korea. However, the decision angered South Koreans, sparking widespread protests and causing crashes in crypto and stock markets. Bitcoin, for instance, briefly dropped by 30% in local markets.
South Koreans Embrace Crypto Risk-and-Return Possibilities
According to a Bloomberg report, trading on the country’s crypto exchanges has outpaced that of traditional stock exchanges. The report highlights that from November 5 to 28, trading on Korean cryptocurrency exchanges averaged US$9.4 billion (AU$14.6 billion) daily, surpassing the Kospi’s US$7 billion (AU$10.9 billion).
Related: Breaking: Bitcoin Surges Through US$100k Mark for First Time Ever
During this time, the Kospi declined by 3.4%, while an index of the top 100 digital tokens surged by 53%.
South Korea is a crypto-enthusiastic country, with 15% of the population registered to trade. The high risk-and-reward profile of crypto is seen as a chance to get ahead financially in a country plagued by high living costs and stagnant wages.
South Koreans often seek smaller, riskier altcoins for higher gains, especially those late to Bitcoin. According to Bloomberg these small caps make up 80% of exchange volume.
Likely Market Impact of Instability in South Korea
The pressure is now on for President Yoon, with calls for resignation followed by a motion to impeach him. Although prices have since recovered, it will be interesting to see if this has any consequences for other markets.
Presto Research analyst Min Jung said an impeachment proceeding has the potential for more volatility, but said that “the impact is likely to be limited to the domestic market and short-lived”.
DeSpread Research President Seunghwa Lee, however, said instability in South Korea has the potential to spill over into other markets. This is especially a risk for cryptocurrencies heavily traded in South Korea, such as XRP, he noted.
Related: US Congressman’s $30K Investment in Ski Mask Dog Sparks Memecoin Rally
Given the significant influence of South Korean investors, political events that dampen investor sentiment could have sufficient impact on global markets.
DeSpread Research President, Seunghwa Lee XRP is down globally over 10% in the past 24 hours, despite the good news that a pro-crypto candidate has just been nominated as SEC chair by Donald Trump.
Author
Aaron Feuerstein
Aaron Feuerstein is a freelance writer based in Melbourne. His focus is on decentralised finance and the regulatory space surrounding blockchain. He holds a Master's in Accounting. When he is not studying the latest legal case, he enjoys his time as a modest but eager hobby cook.
