South Korea’s implementation of martial law has unexpectedly driven the country’s cryptocurrency market to new heights, with trading volume reaching a record-breaking $34.2 billion in the past 24-hour period.
This dramatic surge in trading activity underscores how geopolitical events can trigger significant market movements, especially in the volatile crypto sector.
Five major crypto exchanges in South Korea saw an increase in trading volume, including Upbit, Bithumb, Coinone, Korbit, and Gopax.
This development reflects a growing trend where political unrest affects financial markets, often leading to panic selling and increased trading volumes as investors look to move assets quickly.
Trading volumes increased following South Korea’s decision to impose martial law on December 3, 2024.
Following the emergency curfew and restrictions imposed by the government, crypto markets in the country witnessed massive activity.
According to CoinMarketCapSouth Korea’s combined crypto spot trading volume surged by nearly 50% in just one day, surpassing the previous record of $18 billion set a day earlier.
This represents a striking contrast to stock market volume, which was up more than 22%.
The main reason for the increase in trading activity was the political instability surrounding President Yun Suk-yeol’s sudden imposition of martial law.
This decree, which lasted only six hours, was enacted under the pretext of protecting South Korea from “communist forces of North Korea” and eliminating alleged “anti-state elements”.
However, the sudden implementation of the law sparked widespread protests and unrest.
In response to the political chaos, South Korean citizens rushed to sell their cryptocurrencies, causing a sharp decline in the prices of the digital asset.
Prices of major cryptocurrencies such as Bitcoin and Ethereum fell to their lowest levels in months, with Bitcoin falling to around 88 million won and Ethereum to 4.2 million won.
Some exchanges’ sites were shut down due to excessive trading activity.
The surge in trading was also reflected in the market dominance of South Korea’s largest exchange Upbit, which alone accounted for more than $27.25 billion in spot trading volume.
Martial law has a sharp impact on crypto prices
As the political unrest unfolded, many South Korean traders decided to liquidate their crypto holdings out of fear of further volatility.
This panic selloff was not unlike previous market reactions seen during other major geopolitical events, such as the onset of the COVID-19 pandemic and the outbreak of war in Ukraine.
The sudden selloff rocked the market, with altcoins like Ripple (XRP), Stellar Lumens (XLM) and Solana experiencing double-digit price drops.
The political turmoil surrounding the martial law decision also caused turmoil in the broader financial markets.
Crypto investors in South Korea, worried about the possibility of more disruptions, reacted by moving quickly to secure their assets.
As the crisis developed, the country saw a surge in trading volumes as local exchanges were flooded with sell orders.
BOK promises to boost short-term liquidity to stabilize FX market
In response to South Korea’s recent political turmoil, the Bank of Korea (BOK) on Wednesday announced its commitment to boost short-term liquidity and stabilize foreign exchange (FX) markets as needed.
The Bank of Korea called an emergency board meeting early Wednesday to assess the financial impact of the turmoil. After the meeting, the central bank issued a statement promising to inject funds into the market through special lending if needed.
“As announced together with the government, we will provide adequate liquidity for a limited period of time until financial and foreign exchange markets stabilize,” the BOK said.
Local reports from Yonhap News revealed that the country’s financial regulator is prepared to deploy 10 trillion won ($7.07 billion) into a stock market stabilization fund if necessary.
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