Written by: Pzai, Foresight News
On the evening of December 3, South Korean President Yoon Suk-yeol unexpectedly held a televised live broadcast at the presidential office, announcing the implementation of 'emergency martial law'. That evening, a confrontation occurred in front of the National Assembly between members of the opposition, but at 4 AM, the martial law was declared invalid by a vote in the South Korean parliament and was lifted by Yoon Suk-yeol. This was the first martial law issued since 1980, but it only lasted 6 hours. The impact of this martial law on the financial market, especially on the volatility of the cryptocurrency market, was quite severe.
As of the time of writing, trading pairs on the Upbit platform have basically returned to normal. The price of Bitcoin is reported at 134,640,000 KRW (approximately $95,000).
Market Reaction
After the announcement of martial law, the Korean cryptocurrency exchange Upbit experienced trading interruptions due to high traffic, with the Bitcoin/KRW trading pair briefly spiking below 90 million KRW (approximately $63,300), and the USDC/USDT exchange rate briefly rising to 1.2.
Additionally, it is worth noting that the XRP token, which Koreans are keen on, also briefly dropped from $2.9 to $1.16. As a relatively mature country in the cryptocurrency market, South Korea's daily retail trading volume on December 2 reached $18 billion, 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 the performance of related tokens, the Korean public chain KAIA token briefly dropped below $0.25 during the event last night and then rebounded to $0.338.
Regarding exchange inflows, over 163 million USDT flowed into Upbit within 1 hour after the announcement of 'martial law', hoping to seize bottom-buying opportunities during the volatility. After the Korean authorities announced 'unlimited liquidity will be provided to the market' and a vote by lawmakers, the market's volatility was quickly smoothed out by the influx of funds.
On Polymarket, the probability of the impeachment of the South Korean president began to attract the attention and buying of traders, with the probability of Yoon Suk-yeol stepping down this year predicted at 61%, and the probability of his impeachment this Friday quickly soared to 45%, then dropped to 33%.
Market View
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 South Korean stock market opening as usual today, and related tokens subsequently rebounding to normal levels.
The strategic consulting firm The Geopolitical Business stated that if the political crisis continues, both domestic and international measures in South Korea may face various obstacles and paralysis, while the lifting of the martial law and the announcement by the South Korean Joint Chiefs of Staff to temporarily control troop movements except for surveillance and alert operations have eased market sentiment.
Before this martial law incident, South Korea's cryptocurrency market was attracting an increasing number of middle-aged and elderly individuals. Recently, the number of accounts for users over 60 on the Korean exchanges Upbit and Bithumb has increased by 30.4% compared to the end of 2021, and the aftermath of the political turmoil will be the primary factor users consider for asset storage, including an increase in demand for cryptocurrencies due to heightened distrust in local stocks and foreign exchange markets, while Upbit's XRP trading volume has exceeded that of the Korean KOSPI stock index.
Additionally, this volatility also reflects that relatively isolated fiat exchanges, as the main trading venue for Koreans, are significantly affected by geopolitical factors, and it is expected that some Korean users will turn to on-chain liquidity trading and asset storage in the near future.
