As a seasoned analyst with over two decades of experience in global financial markets, I’ve seen my fair share of market volatility and liquidity crises. The recent events unfolding in South Korea’s cryptocurrency market following President Yoon Suk Yeol’s declaration of martial law is a stark reminder of the unique challenges that can arise when political instability intertwines with financial markets.
The absence of significant market participants and a shortage of available funds led to a decrease of approximately $30,000 in Bitcoin prices on South Korean exchanges after President Yoon Suk Yeol announced martial law.
On the 3rd of December, President Yoon declared martial law in a televised speech, justifying this move by stating that it was essential for the removal of those opposed to the state, as well as addressing potential threats from North Korea’s communist military forces.
The declaration triggered immediate market disruptions, with Bitcoin (BTC) on the South Korean exchange Upbit dropping to as low as 92 million Korean won (about $65,000).
One expert explained the steep drop-off as being due to an unexpected drying up of market activity. Trader Ltrd suggested that this scarcity of active players led to an uneven distribution of buy and sell orders, causing a widening gap of approximately 10% between bids and asks during the turbulent period.
Lack of liquidity sends BTC to $65,000 in South Korea
In a discussion about X, trader Ltrd expressed that the decline wouldn’t have been as severe if market liquidity were typical. Interestingly, the trader noted that following the martial law announcement, all participants seemed to vanish from the market. The analyst commented:
“The reason is simple — it is shockingly hard to enter the Korean market and trade there. This means that only a few players can provide liquidity and arbitrage those discrepancies.”
According to Ltrd’s analysis, South Korean traders experienced increased prices due to restricting the market to just a handful of participants. Ltrd suggested that if more market makers had participated, the price fluctuations could have been reduced.
The trader additionally emphasized significant selling force across all assets, leading to an unexpected decrease. However, Ltrd contends that the market exaggerated its response, suggesting that the drastic price plunge wouldn’t have occurred if more market makers had been active in the South Korean market.
South Korean markets recovered back after martial law reversal
Following the announcement of martial law, 190 members of South Korea’s legislature subsequently voted to revoke this declaration. President Yoon consented to this action and rescinded the order, thus alleviating the tension.
After the recent turnaround, Bitcoin‘s value surged back up, being traded around 135 million Korean Won (approximately $95,000 USD) when it was last published.
As a crypto investor, I’ve observed that periods of political instability in South Korea can exacerbate liquidity shocks within its digital currency market. This temporary crisis serves as a stark reminder of the vulnerabilities inherent in these markets.
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2024-12-04 15:52