Written by: MORBID-19
Compiled by: Deep Tide TechFlow
I hope everyone can make life-changing money on the chain. Not? Maybe it was sold off by the South Korean market. I've seen dozens of profit and loss screenshots, with profits in the hundreds of thousands or even millions of dollars. Even in real life, I’ve heard of some people I know making quite a bit of money. Yes, if you don’t trade Meme coins, you won’t make money.
Until now, the public perception has been that South Koreans only trade on centralized exchanges, mainly on Upbit. This is only partially true. When there’s a 1000-fold opportunity on-chain, what use is a centralized exchange?
However, when you look at $DOGE and $SHIB, Upbit is still the second-largest spot market.
"Don't underestimate the crazy buying power of South Koreans" is an old saying.
This time, the South Korean market feels different
But where's the premium? For the past few weeks, I've been talking about the South Korean market premium as a sentiment index. If the South Korean market premium reaches +10%, it's time to start stabilizing slowly. But this time seems different. I've seen people checking their Binance portfolios on the subway, and friends are asking about DOGE.
But why is there no 10% South Korean market premium?
The price of Bitcoin has reached $90,000, which is hard to believe. But this chart looks completely nonsensical. What is going on?
Are South Koreans not buying? Not at all. Recently listed projects on Upbit have experienced significant surges.
Are there no new users? Not really. South Korea's crypto apps have recently ranked high in the app store.
Have we gotten better at arbitrage? Not really.
If that’s the case, why didn’t we perform better earlier this year?
In fact, we have indeed found better ways to arbitrage the South Korean market premium. The team at Presto Research has done an excellent job in this regard: while it may just be because "we are still in the early stages," Upbit's recent trading volume exceeded $18 billion, far surpassing the $14 billion in March 2024 when the South Korean market premium reached 10% and maintained at 5%. So why is there no premium now?
So, what changes have occurred from March 2024 to now? I believe the main reasons are: 1) The listing of USDT, 2) Macro market conditions, 3) The implementation of the "Virtual Asset User Protection Act." Although Bithumb listed $USDT back in December 2023, Upbit followed relatively late, catching up in June 2024. Before that, most South Korean investors used $TRX or $XRP to transfer cryptocurrencies from South Korean exchanges to global platforms like Binance, Bybit, and OKX. With the listing of USDT, it is now easier for people to arbitrage the premium and directly invest in dollars.
Especially as the won weakens and the South Korean stock market underperforms relative to cryptocurrencies and the U.S. stock market, interest in investing in dollars has surged. This has led to an increase in USDT trading volume, which currently has a market share of about 9%, compared to just 2.6% in December. It's worth noting that most trading pairs on South Korean exchanges are in won (e.g., BTC/KRW, ETH/KRW), not stablecoins. This means that most of the USDT trading volume comes from the USDT/KRW trading pair.
Therefore, one of the historically easiest ways for South Koreans to make money has been through trading the South Korean market premium. This includes buying USDT, transferring it to foreign exchanges, making profits, and returning to the South Korean market when the market premium arises (while earning profits in won after the law is enforced + Bithumb's zero trading fee promotion) — or simply buying USDT when the South Korean market premium is low and selling when it’s high. This trading has become more active, and I believe it is suppressing the South Korean market premium.
—Min Jung (Click here to read the full article)
Oh my, I hadn’t thought of this before. Therefore, my previous assumption that the South Korean market premium as a bull market indicator would disappear with the activation of institutional accounts now seems completely outdated. The South Korean market premium may not matter at all!
But is this a good thing or a bad thing?
I'm not sure either. For South Koreans, a lower South Korean market premium means prices are fairer. And for the broader market, they lose an indicator for judging market peaks.
However, I think South Koreans are also slowly losing something to some extent. Just today, the Financial Supervisory Service (FSS) suggested allowing exchanges to freeze cryptocurrency trading accounts without notifying users.
According to the (Virtual Asset User Protection Act), exchanges must disclose the reasons for freezing accounts before taking action. However, the FSS hopes to allow exchanges to preemptively freeze accounts in certain "special circumstances" to respond to emergencies such as hacking, fraud, and the familiar attempts at money laundering.
In principle, prior notice is required, but they emphasize that the predictability of the reasons for account freezes and the purpose and intent of advance notice should be comprehensively considered.
The same applies when the national tax authority or investigative agency requests to freeze accounts and asks for delayed notification to achieve its investigative purposes.
The FSS emphasizes that if there are no unavoidable circumstances that prevent it after careful consideration, prior notice must be provided.
Wait, what does this mean? They not only allow accounts to be pre-frozen to protect consumers but also protect national interests? Who would have thought? This is yet another reason not to leave money in South Korean exchanges. Imagine a random altcoin on Upbit making five times, only to have the funds frozen by the tax office.
Needless to say:
The city of Paju in Gyeonggi Province has announced plans to become the first local government in South Korea to directly sell virtual assets confiscated from local tax debtors to collect unpaid taxes.
To implement this plan, Paju City issued notifications on the 13th to 17 individuals who collectively owe 124 million won in local taxes, warning them that their virtual assets are about to be transferred and sold.
The city has already confiscated these tax debtors' virtual assets through a cryptocurrency exchange. If these individuals fail to pay their overdue taxes by the end of this month, the city government plans to transfer approximately 50 million won worth of virtual assets to its account to offset the unpaid taxes.
According to the city government, virtual assets have recently been used by tax debtors as a means to hide or transfer assets. A city official explained, "Collecting through virtual assets sends a clear message to debtors that they cannot hide assets, and we will continue to track the property of debtors until we implement tax measures." — KBS News
Why do South Koreans choose to keep their funds on exchanges? Why would they want to exchange cryptocurrencies for won? As the market expands, this question becomes increasingly apparent. If everyone knows that cryptocurrency assets can be so easily confiscated, who would still be willing to deposit them in South Korean exchanges?
If cryptocurrencies are truly a trillion-dollar opportunity and the government is willing to support it, then funds must be able to flow freely. There’s a reason people prefer to use dollars over renminbi; the latter might be confiscated.
It is precisely because of the potential for "confiscation" that the crypto industry has emerged. Imagine an industry being accepted yet reverting to past modes of thinking; it’s unreasonable.
These protectionist and highly controlled measures will only increase capital outflow, especially in high-risk on-chain activities. Assets will remain on-chain, and what they want to protect will ironically be destroyed by the fear of loss.
