The disappearance of key market players and a liquidity crisis contributed to a $30,000 drop in Bitcoin prices on South Korean platforms following President Yoon Suk Yeol’s declaration of martial law.
On Dec. 3, President Yoon announced martial law during a live television address, citing a need to “eliminate anti-state elements” and address “threats posed by North Korea’s communist forces.”
The declaration triggered immediate market disruptions, with Bitcoin (BTC) on the South Korean exchange Upbit dropping to as low as 92 million Korean won (about $65,000).
BTC/KRW activity on South Korea-based crypto exchange Upbit. Source: Upbit
One analyst attributed the sharp decline to a sudden disappearance of liquidity. According to trader Ltrd, the lack of active participants caused an imbalance between bids and asks, resulting in a 10% spread during the crisis.
Lack of liquidity sends BTC to $65,000 in South Korea
In an X thread, trader Ltrd said that the drop would not be this brutal if the liquidity was normal. However, the trader said that during the martial law declaration, “all the players just disappeared from the market.” The analyst wrote:
“The reason is simple — it is shockingly hard to enter the Korean market and trade there. This means that only a few players can provide liquidity and arbitrage those discrepancies.”
South Korean traders paid the price for limiting the market to only a few players, according to Ltrd. Ltrd said the price volatility could have been mitigated with broader market maker participation.
Sell and buy amounts on Upbit. Source: Ltrd
The trader also highlighted massive sell pressure on all instruments, causing a sudden drop. Despite this, Ltrd said the market overreacted, and the extreme price drop would not have happened if more liquidity providers were participating in the South Korea market.
South Korean markets recovered back after martial law reversal
Hours after the martial law declaration, 190 lawmakers in South Korea’s parliament voted to nullify the martial law declaration. President Yoon accepted the decision and lifted the order, easing tensions.
Following the reversal, Bitcoin prices rebounded, trading at approximately 135 million KRW (about $95,000) at the time of publication.
Market observers noted the temporary crisis highlights the vulnerability of South Korea’s cryptocurrency markets to liquidity shocks, particularly during times of political instability.
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