Whenever a country is engulfed by a crisis that punishes its fiat currency, households and businesses tend to flock to Bitcoin and Tether’s USDT to safeguard their wealth.
Not South Korea.
Even as citizens take to the streets and call for president Yoon Suk Yeol’s ouster, crypto traders are piling into XRP over Bitcoin and other assets.
“In the past 24 hours, XRP has generated four times more trading volume than BTC on Upbit, Korea’s largest crypto exchange,” Zhong Yang Chan, head of research at CoinGecko, told DL News.
On Tuesday, crypto trading on local exchanges reached a whopping $34 billion in volume, according to local crypto news outlet, Digital Asset.
Martial law
The crisis was triggered that night local time when the president suddenly declared martial law in response to a conflict with political opposition in Seoul. Upending decades of democratic tradition, the decree outraged lawmakers and citizens and triggered a push for his impeachment.
It also sent the won plunging. Crypto currencies mirrored the plunge at double-digit levels on local exchanges.
Bitcoin dropped an astonishing 33% to $61,000, and XRP lost half its value, bucking a 63% surge in the rest of the world over the last seven days.
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But those prices were occurring in a South Korean bubble, and the gap between those valuations and the actual prices elsewhere created a monumental gap.
For fast moving traders, it was a rare opportunity to buy crypto in South Korea and instantly pocket big gains by selling assets on other exchanges.
“Yay for arbitrage,” Ian Cho, a South Korean founding member of ITAM games, told DL News.
‘I anticipate the Korean trade volume will see an all-time high and extreme volatility.’
— Ian Cho, ITAM Games
Now, investors are bracing for volatility.
“I anticipate for the Korean trade volume to see an all time high and extreme volatility,” Cho said.
As it happens, South Koreans have been bracing for a political crisis following months of legislative gridlock and a steady tumble in the won; it plunged to a two-year low briefly on Wednesday and is down 7% for the year.
Upbit rallies
“Facing months of impeachment calls, the president declared martial law without informing same-party lawmakers or his closest aides, and they are all against him now,” said Ki Young Ju, the CEO of CryptoQuant, on X.
Amid the turmoil, Upbit, one of the country’s largest exchanges, has rallied.
Data analytics firm Kaiko reported that the platform — along with Coinbase — have posted the largest gains in market share.
It now accounts for almost 11% market share in South Korea, up from about 4% in July.
Crypto trading has also outpaced the local stock market, known as the Kospi.
Crypto trading on local platforms averaged $9.4 billion, topping the $7 billion average of the Kospi index, between November 5 and November 28, reported Bloomberg News.
Chan also said that there hasn’t been a significant outflow of Bitcoin from exchanges, and this is an indication that there are no significant outflows from the country.
The won falls
A languishing won is giving South Korean investors a headache.
While a bad exchange rate for the won has always drawn more people into crypto, now the “anxiety about KRW is a big driving factor for a strong selling sentiment,” Cho said.
But that’s not the only reason crypto plunged yesterday.
“It was also because Korean centralised exchanges were not able to handle the traffic,” he said.
Negative kimchi premium
Even so, Koreans are now in a crypto market that’s been turned upside down. Usually, its crypto-crazed Korea where Bitcoin and its ilk fetch the highest prices worldwide, the so-called kimchi premium. But now it’s turned negative.
Chan said the development shows how Koreans are still wary of seeing crypto as safe harbour.
“Korean investors view crypto less as a safe haven asset, but more as a risk-on instrument,” he said.
CryptoQuant’s Ju echoed the sentiment.
“Bitcoin’s kimchi premium hits an all-time low,” he said on Tuesday. “Shouldn’t Bitcoin go up during times of political instability?”
Pedro Solimano is a markets correspondent based in Buenos Aires. Got a tip? Email him at [email protected].
