What Sparked the Turmoil in South Korea’s Crypto Market?
On December 3rd, President Yoon Suk Yeol declared a martial law. This act was intended to counter what he called "anti-state behavior" and “rebellion incitement” from the opposition. This announcement caused widespread panic and a significant plunge in cryptocurrency prices across South Korea.
What Were the Effects on Cryptocurrency Prices and Trading?
How Did Bitcoin and Other Cryptos React?
As a direct consequence of the martial law declaration, cryptocurrency prices on South Korean exchanges nosedived. Bitcoin dropped over 30% to $62,000 on Upbit, with other cryptocurrencies like XRP witnessing an astonishing 56% decline within 30 minutes on KRW pairs. Global market prices remained stable during this period, causing a $4,000 arbitrage gap that illustrated growing fear among investors.
What Were the Market Reactions?
The unprecedented spike in trading volume led to major disruptions. Local exchanges like Upbit and Bithumb faced outages due to the overwhelming traffic. Though the finance ministry pledged "unlimited liquidity", it could do little to stabilize the frantic market.
What Political Events Followed Martial Law?
How Did Lawmakers Respond?
Lawmakers made a swift move against the President, initiating impeachment proceedings against him. This action stemmed from widespread accusations of acting unconstitutionally and threatening democracy. Massive protests erupted, demanding Yoon's resignation.
What Was the Outcome of Political Unrest?
Following the martial law announcement, the country saw immense civil unrest. President Yoon retracted the martial law declaration, and his aides offered resignations, intensifying the political crisis. The discord between the presidency and parliament sparked worries about the future regulatory environment for cryptocurrencies in South Korea.
How Did the Market Recover After the Crisis?
What Happened to Pricing After the Chaos?
The South Korean crypto market made a swift recovery the very next day. Bitcoin was trading at around 136 million KRW, recovering from the previous day's low of 116.4 million KRW. XRP also bounced back, trading at 3,700 KRW, up from 2,800 KRW.
What Caused the Recovery?
The recovery was attributed to the finance ministry's liquidity intervention, as well as the resumption of normal operations on exchanges. Despite the chaos, Upbit had managed to process $27.25 billion in trades, as the overall crypto trade volume in South Korea ballooned to $34.2 billion over the last 24 hours.
What Are the Implications for Crypto Management and Compliance?
What Are the Regulatory Issues At Play?
While martial law itself didn't bring about new crypto regulations, it highlighted the existing challenges South Korea faces. The country has stringent capital controls, impacting cryptocurrency prices and trading behaviors. Recently, South Korea delayed implementing a 20% tax on capital gains from crypto until 2027.
What Does Political Stability Mean For Crypto?
Implicitly, political stability is crucial for a positive environment for cryptocurrency investment. A stable political system allows for coordinated policies towards crypto assets, which also fosters financial stability, compliance, and global coordination. South Korea's turmoil displayed how political instability can disrupt liquidity and management in volatile markets.
