South Korea crisis sparks interest in Bitcoin
The political situation in South Korea is extremely uncertain following the recent martial law attempts. The current war between the executive and legislative branches could lead to a civil conflict with unpredictable consequences. This volatile scenario leads to a growing interest from investors in reserve assets such as Bitcoin.
The context:
Although the Cold War ended 34 years ago with the fall of the Berlin Wall, that reality never applied to the Korean peninsula. The division between communism and capitalism has persisted since the 1950-53 civil war, which divided the country between North and South. To make this situation more peculiar, the war between the two sides never officially ended, since both claim sovereignty over the entire peninsula.
It must be extremely difficult for left-wing political parties to engage in politics, but they have managed to win parliament. How do you explain the surge in interest in Bitcoin in this context?
Why is interest in Bitcoin increasing in this context?
The political climate surrounding President Yoon Suk Yeol has kept the country in serious trouble for quite some time. The economic situation seems to be not going well for the population, which is reflected in the impossibility of meeting basic financial goals.
In this sense, the odyssey of paying for health, education and rent (buying homes is almost impossible for average families) generated an enormous social crisis. Women in the country refuse to procreate under such an economic climate, which caused an alarming drop in the birth rate.
The next generation in the labour market is in danger and the authorities are trying to force women to have children without guaranteeing stability. This has led to the rise of the left among political preferences due to its pro-majority discourse. Feminist, labour and student movements have become the impetus for the left to dominate parliament.
For investors, one thing is clear: the South Korean bubble has burst, prompting a search for assets like Bitcoin.
Investors want nothing to do with local assets
Political instability and uncertainty about the future of the economy due to falling birth rates mean that local businesses have little potential. Domestic capital therefore sees little appeal in the country's financial assets, leading to an explosive growth in interest in Bitcoin and other cryptocurrencies.
As recently reported , shares of South Korean small-cap companies, grouped on the Kosdaq, are showing a loss of -20% in 2024. Over the same period, the price of Bitcoin is experiencing a +119.71%. But the situation is not only negative for small-cap companies. The benchmark index, Kospi, is also showing a negative performance.
Donald Trump's victory in the United States sparked an increase in this trend. Between November 5 and 28, cryptocurrency exchanges saw a trading volume of $9.4 billion, while on the Kospi it was $7.7 billion, according to data compiled by Bloomberg.
Since Trump won the election, the Kospi is performing at -3.4%. At the same time, an index tracking the top 100 cryptocurrencies is up +53%. The growing interest in Bitcoin and other currencies against local assets became stronger during the last hours, following the crisis.
🚨
Is the Left Preparing to Take Over?
After more than 70 years of ironclad political control, the right's grip appears to be breaking down in South Korea. Parliament has succeeded in overturning the executive's martial law decree and the next step could be the impeachment of President Yoon Suk Yeol.
This suggests that the left has all the conditions to capitalise and take over. Even if they could have the support of the population, the markets obviously do not seem very happy about this possibility. The latter could lead to further bleeding on the stock indices, especially with the unlimited supply that the authorities are now promising.
The more conservative sectors are trying to stop the advance of the left by accusing it of being agents of North Korea (it is not clear whether this is true or just propaganda). In any case, if the left manages to overcome the accusations that it intends to establish communism, its path to power could be a reality.
The combination of all these factors could lead to a situation of acute inflation of the won, which would bring more capital into the cryptocurrency market.
