Emily Walker
On Tuesday, President Yoon Suk Yeol of South Korea made a surprising announcement by declaring martial law, which he later revoked. This unexpected move led to a state of confusion politically and caused tremors in the financial markets.
As a result of this turmoil, South Korea’s stock market experienced a decline, with the benchmark Kospi index dropping by 2% on Wednesday morning. Prior to the market’s opening, the vice minister for economy and finance indicated that the government was prepared to inject nearly $7 billion to stabilize the situation.
While major stocks on the Kospi were declining, trading in cryptocurrencies surged to $34.2 billion, particularly on popular platforms including Bithumb, Upbit, Gopax, and Korbit. Upbit alone handled transactions worth $27.25 billion, showcasing its leading position in South Korea’s crypto sector.
Additionally, the price of Bitcoin briefly fell on local exchanges, indicating a liquidity issue that stressed the fragility of South Korea’s cryptocurrency market.
Swings in the Trading Market
The announcement and subsequent retraction from the president had a negative impact on the stock market in South Korea. The vice chair for economy and finance confirmed that the government could step in with a financial assistance package of up to $7 billion to offset any resulting market disruptions.
During the Wednesday trading session, prominent stocks like Samsung and LG Energy Solution saw drops of 1% and 2.8%, respectively.
The crypto market also witnessed a significant increase in trading volume, surpassing the previous high of $18 billion set on December 2nd. South Korea’s news outlet for cryptocurrency, KWNews, reported that this marked the highest single-day crypto trading volume of the year.
BREAKING: South Korea’s parliament votes 190-0 to lift martial law pic.twitter.com/08Sf0HHZ0C
— BNO News (@BNONews) December 3, 2024
Political Unrest Fuels Cryptocurrency Market Instability
The crypto sector in South Korea faced challenges amid the political turmoil following the announcement of martial law. Bitcoin’s value fell to 88 million won or approximately $62,182 on popular exchanges, as traders rushed to sell, which led to some exchanges experiencing outages.
Shortly after the martial law was declared, the president quickly revoked the order, which contributed to market stabilization. Nevertheless, the opposition party swiftly responded with treason charges against the president and discussions of impeachment began.
Impact of South Korea’s Political Turmoil on Market Liquidity
Despite a rebound in Bitcoin’s price and the broader cryptocurrency market on Wednesday, the political upheaval underscored how susceptible these markets are to liquidity crises. Any form of political instability, such as the martial law announcement, poses a risk to cryptocurrency valuations.
The political situation in South Korea has garnered interest from crypto betting markets and commentators. On Polymarket, the likelihood of President Yoon resigning early reached a peak of 78% for a $500,000 bet before settling at 47%.
Image courtesy of Pexels, chart via TradingView