I didn't expect it; it feels like the 'Seoul Spring' is coming for a second season! If a coup really causes massive upheaval, the impact on the financial markets, especially the cryptocurrency Bitcoin market, would be immense! Let's look at the following aspects!
1. Market Sentiment and Uncertainty
Political turmoil typically increases market uncertainty. In the short term, this may lead to capital outflow from South Korean investors, particularly towards safe-haven assets (such as Bitcoin, Ethereum, etc.). According to data from CoinMarketCap and TradingView, South Korea's cryptocurrency trading volume usually accounts for 4%-6% of global trading volume. If the political situation remains unstable, this capital outflow could affect market volatility, leading to price adjustments in the short term.
2. Depreciation of the Won and Capital Inflow into Cryptocurrencies
If the political situation leads to a significant depreciation of the won (for example, more than 5%), South Korean investors may increase their demand for cryptocurrencies to avoid the risks of fiat currency depreciation. According to historical data (such as during the devaluation of the won in 2018 and 2020), the depreciation of the won typically drives Bitcoin prices up by 10%-20%. If the won experiences a similar situation currently, it may prompt increased demand for Bitcoin and other mainstream cryptocurrencies.
3. Impact on Local South Korean Cryptocurrency Assets
Local South Korean projects like Klaytn and ICON may be directly affected. As the political situation becomes unstable, these projects could face increased regulatory pressure or capital outflow. For instance, in 2020, the South Korean government strengthened regulation on ICOs, resulting in reduced funding and liquidity for many local projects. If such events occur again, it is expected that the market value of these projects will see a significant drop, and even some smaller local exchanges (like Upbit and Bithumb) may face capital outflow.
4. Regulatory and Policy Pressure
The South Korean government has consistently maintained strict regulations on the cryptocurrency market, and political turmoil may increase regulatory pressure, particularly against cryptocurrency assets. In 2021, the South Korean Ministry of Finance introduced new regulations requiring all cryptocurrency exchanges to register and comply with anti-money laundering rules, which could lead to a decline in market liquidity. If policies tighten further, local trading volume is expected to decrease by 5%-10%, affecting the overall stability of the market.
5. Capital Outflow and Capital Market Impact
Local South Korean cryptocurrency exchanges like Upbit and Bithumb may also face capital outflow. For example, in 2020, political turmoil led to a 15%-20% decrease in Bithumb's trading volume as capital flowed to international exchanges like Binance. If the current political unrest intensifies, the market share of local exchanges in South Korea could decrease again, with an expected decline of 5%-10%.
6. Impact on Small and Medium-Sized Coins in the Market
South Korea has many 'altcoins' based on the local market, and these coins (like KLAY, MITH, etc.) hold a certain share in the South Korean market. Political unrest will weaken investor confidence in these coins, leading to significant price fluctuations in the short term, with potential maximum declines exceeding 30%.
The turmoil in South Korea's political landscape could lead to capital outflow in the short term, causing market fluctuations, especially affecting South Korean cryptocurrencies significantly. The depreciation of the won or tightening cryptocurrency regulations may drive capital into safe-haven assets like Bitcoin, while local projects and exchanges may face pressure that could lead to a decrease in market share. In the short term, market volatility is expected to intensify, and everyone should closely monitor changes in policy and market sentiment.