South Korean cryptocurrency markets experienced significant turbulence following President Yoon Suk Yeol’s unexpected martial law declaration, creating a notable divergence between global and local crypto prices.
Bitcoin fell as low as $79,000, and XRP traded at $1.89 on Upbit for over an hour. This saw users crowd the exchanges to file purchase orders and buy these tokens at an unprecedented low price for the bull market.
A Brief Chaos in South Korea’s Crypto Market
The political crisis began when President Yoon declared martial law Tuesday night, prompting military forces to attempt entry into parliament. Yoon justified the move as necessary to combat “pro-North Korean anti-state forces.”
This announcement drove the country’s economy into a momentary chaos. The South Korean Won’s price surged against the USD, which meant a brief crypto arbitrage opportunity opened up for USDT holders.
Bitcoin plunged over 30% on South Korean exchanges, including Upbit, during Tuesday night trading while dropping only 2% in global markets. The stark difference reflected both panic selling by local traders and a nearly 3% surge in the USD/KRW exchange rate.
According to Lookonchain data, over $163 million USDT flowed into Upbit alone, as many whales placed large orders of USDT. However, lawmakers, including the leader of his own party, Han Dong-hoon, swiftly challenged martial law to restore order back to the economy.
Parliamentary opposition proved effective, with lawmakers voting to reject the martial law declaration early Wednesday. Markets stabilized following parliament’s intervention, with Bitcoin recovering to $95,167 as of 17:30 UTC on Wednesday after briefly surpassing $96,000.
Prediction Markets React
Political uncertainty has spilled into crypto prediction markets, with Polymarket launching a betting a betting pool on President Yoon’s potential resignation. The market asks whether Yoon will leave office between December 2 and 31, 2024. As of 17:30 UTC Wednesday, approximately $257,000 in bets have been placed, with a 61% probability assigned to Yoon’s resignation.
The episode highlights the growing interconnection between political stability and cryptocurrency markets, particularly in regions with high crypto adoption, like South Korea.
Throughout this year, South Korea’s crypto market has seen increasing activity from local users despite regulatory challenges. As BeInCrypto reported in October, the country saw a record 67% increase in daily trading volume, hitting 6 trillion won.
However, crypto exchanges, particularly Upbit, have continually faced regulatory hurdles. In November, financial watchdogs flagged 600,000 potential KYC violations on the exchange. These violations have threatened Upbit’s license renewal despite the exchange’s commitment to transparency.
Regulators also launched an investigation into Upbit’s potential monopoly over South Korea’s crypto market. The exchange is also alleged to be associated with pump-and-dump schemes, exploiting regulatory gaps and attracting scrutiny.
At the same time, nearly 35% of cryptocurrencies on various South Korean exchanges were delisted, with half lasting less than two years. These delistings resulted in major investor losses due to declining liquidity and plummeting prices on inaccessible coins.
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