- South Korean crypto exchanges witnessed dramatic flash crashes in digital asset prices yesterday
- The instability followed the Prime Minister’s surprise announcement of martial law amid escalating political and economic tensions
- Bitcoin and Ethereum prices briefly plummeted by over 20% on some local platforms before partially recovering
The South Korean cryptocurrency market yesterday experienced sudden turbulence following the Prime Minister’s declaration of martial law. Major digital assets like Bitcoin and Ethereum saw double-digit drops in value, with the decision sparking panic among investors, leading to liquidity shocks and price discrepancies on domestic exchanges compared to global averages. The decision has since been reversed, leading to the markets staging a recovery.
Martial Law Announcement Sparks Market Chaos
South Korea’s Prime Minister, Yoon Suk Yeol, announced martial law yesterday in response to escalating political unrest and security concerns, sending shockwaves through financial markets. Crypto exchanges were particularly affected, with platforms like Upbit and Bithumb reporting flash crashes in Bitcoin prices to as low as $72,000, a stark deviation from its global price of $95,000. Likewise, Ethereum, too, saw a 25% drop, triggering widespread sell-offs.
A representative from Bithumb explained the crash, saying, “The sudden political uncertainty led to a massive sell-off as investors scrambled to liquidate assets, fearing stricter government control over financial systems.”
Panic Selling and Market Discrepancies
The price discrepancies between South Korean and international exchanges, often referred to as the “Kimchi premium,” have widened during the chaos. This phenomenon has been amplified by panic selling, where investors offloaded holdings in fear of regulatory crackdowns that could accompany martial law. “The local market has always been sensitive to political changes, but today’s events are unprecedented,” said Lee Min-jung, a Seoul-based crypto analyst.
Some investors have reported significant losses, while others capitalized on the temporary price differences to make arbitrage trades. However, experts warn that continued instability could harm the long-term credibility of South Korea’s crypto markets.
The government blocked the Prime Minister’s decision, meaning that order will be restored, at least temporarily, although the crypto markets could see more volatility in the short term.
