| The declaration of martial law by South Korean President Yoon Suk Yeol amid a political dispute in the country shocked the world — including, for a brief period, crypto markets.
Market reaction to the news was much more exaggerated on Korean exchanges, with the price of Bitcoin against US dollar-pegged stablecoin Tether falling as low as $71,814.99 on Tuesday, at the same time that a Bloomberg composite of Bitcoin prices across global exchanges showed it trading around $93,600.
The dislocation, however brief, was more notable than it may appear at first blush: The so-called “Trump trade” wreaking havoc on Asian currencies and stock markets has increasingly pushed South Korean investors to seek refuge in volatile cryptocurrencies. Famous for their love of high-risk, high-return products, South Korean traders have sent volumes in crypto tokens to higher levels than the nation’s benchmark Kospi equity index since Donald Trump’s election victory. From Nov. 5 through Nov. 28, the daily average trading on Korean crypto exchanges amounted to about $9.4 billion versus $7 billion for the Kospi, according to data from CCData and Korea Exchange. While the Kospi is down about 3.4% since the election, an index tracking the top 100 digital tokens is up 53% over the same period. South Koreans have stuck with the digital-asset class despite bouts of market turmoil, such as the crypto winter that started in 2022. Today, more than 7 million Koreans — almost 15% of the population — are registered to trade on a crypto exchange. The interest is not new, as many Koreans profited handsomely from Bitcoin’s rally of more than 1,200% in the past five years, far outpacing the 20% return for the Kospi. Those who missed out on getting into Bitcoin early now try their luck with smaller, riskier “altcoins,” which make up more than 80% of the trading volume on local platforms. Promotions by crypto exchanges such as fee reductions also have attracted investors, according to Simon Kim, chief executive officer of Korea-based crypto venture-capital firm Hashed. “For example, Bithumb’s zero-fee promotion increased its market share to over 30%, drawing investors toward cryptocurrencies,” he added. Korean regulators also have refrained from approving spot-Bitcoin exchange-traded funds due to fears of outflows from local stocks. This has further pushed investors to wager on overseas funds tracking the crypto sector. In the past month, an exchange-traded fund that aims to provide twice the daily returns of Michael Saylor’s Bitcoin proxy MicroStrategy Inc. and a similarly leveraged Ether ETF were among the top-10 most-bought overseas securities in Korea, according to Korea Securities Depository data. The export-oriented country is considered to be in the crosshairs of President-elect Trump’s tariff plans. South Korea is among the world’s most trade-reliant nations, with its businesses embedded widely across supply chains involving everything from semiconductors to automobiles and petrochemicals. China is its biggest trading partner; its manufacturers buy intermediate goods from Korea and assemble them into products that are shipped elsewhere, including the US. Trump has vowed to impose further tariffs on goods imported from China, and he characterized South Korea as a “money machine” that should shoulder more of the costs for the American troops it hosts. Recently, the Bank of Korea announced a surprise rate cut as Governor Rhee Chang-yong sounded the alarm over the potential impact on global trade of Trump’s return to power. “Among the biggest changes since August is the ‘red sweep’ in the US, which was bigger than we forecast,” Rhee said at a briefing following the decision, referring to wins by US Republicans in not only the presidential election but also the House and Senate. It all adds up to an atmosphere that seems to be making South Korean investors even more comfortable with the risk-reward scenario in crypto markets. | 
