Written by: Pzai, Foresight News
On the evening of December 3, South Korean President Yoon Suk-yeol unexpectedly conducted a televised broadcast from the presidential office, announcing the implementation of 'emergency martial law'. That night, there was a standoff between members of the opposition party in front of the National Assembly, but at 4 AM, after the martial law was declared invalid by a vote in the National Assembly, it was lifted by Yoon Suk-yeol. This was the first martial law issued since 1980, but it lasted only 6 hours. The impact of this martial law on the financial market, especially the volatility in the crypto market, was quite severe.
As of the time of publication, trading pairs on the Upbit platform have largely returned to normal. The price of Bitcoin is quoted at 134,640,000 KRW (approximately $95,000).
Market Reaction
After the announcement of martial law, the South Korean crypto exchange Upbit experienced trading interruptions due to excessive traffic, with the Bitcoin/KRW trading pair briefly spiking below 90 million KRW (about $63,300), and the USDC/USDT exchange rate briefly rising to 1.2.
It is also worth noting that the XRP token, which is popular among Koreans, briefly fell from $2.9 to $1.16. As a relatively mature country in the crypto market, South Korea's retail trading volume on December 2 reached $18 billion in a single day, mostly led by altcoins (such as DOGE and XRP), with XRP alone accounting for $6.3 billion. DOGE also briefly dipped below $0.23 during this turmoil.
In terms of token performance, the South Korean public chain KAIA token briefly fell below $0.25 at the time of last night's incident but rebounded to $0.338.
In terms of inflow into exchanges, within one hour after the announcement of 'martial law', over 163 million USDT flowed into Upbit, hoping to seize the bottom opportunity amidst the volatility. After the South Korean authorities announced they would provide 'unlimited liquidity' to the market and after the voting by legislators, the market's volatility was quickly smoothed out by the influx of funds.
On Polymarket, traders have started to pay attention to and buy the probability of impeachment for the South Korean president, with the probability of Yoon Suk-yeol stepping down this year predicted at 61%. The probability of his impeachment also quickly soared to 45% this Friday, before dropping to 33%.
Market Perspectives
After the incident, South Korean regulators stated they were ready to deploy a 10 trillion KRW stock market stabilization fund at any time and would take measures to normalize the financial market. The market responded accordingly to South Korea's bailout measures, with the stock market opening as usual today and related tokens subsequently rebounding to normal levels.
Strategic consulting firm The Geopolitical Business stated that if the political crisis persists, both domestic and international measures in South Korea may face various obstacles and paralysis, while the lifting of martial law and the South Korean Joint Chiefs of Staff announcing temporary control over troop movements, except for monitoring and alert operations, have also momentarily eased market sentiment.
Before this martial law incident, South Korea's crypto market was attracting an increasing number of middle-aged and elderly participants. Recently, the number of user accounts over 60 on South Korean exchanges Upbit and Bithumb grew by 30.4% compared to the end of 2021, and the aftermath of the political turmoil will become a primary factor users consider for asset storage, including the increased distrust in the local stock and foreign exchange markets, leading to a demand for cryptocurrencies, with Upbit's XRP trading volume exceeding that of the Korean KOSPI stock index.
Additionally, this volatility reflects that relatively isolated fiat exchanges, being the primary trading venue for Koreans, are significantly affected by geopolitical factors, and it is expected that some South Korean users will shift towards on-chain liquidity trading and asset storage in the near future.
