South Korea's stock market is experiencing another shock, resulting in a record surge of activity on cryptocurrency exchanges. While the KOSPI index is rapidly losing ground, trading volumes on the largest local platform, Upbit, are showing explosive growth, exceeding 1400%.
On July 14, the KOSPI decline continued. The index lost another 4%, dropping to 6534.34 points. Shares of tech giant SK Hynix were particularly hard hit, plunging more than 7%. This only worsened an already bleak picture: from its peak on June 19, the KOSPI has already lost about 27.47%.
Cryptocurrency Exchange as a "Safe Haven"
Against the backdrop of this chaos in traditional markets, investors appear to have begun massively shifting capital into digital assets. According to my data, the daily trading volume on Upbit soared to $4.27 billion. This is a colossal jump of 1426.2% compared to the previous day. Such dynamics are a clear signal of shifting priorities: when the traditional market collapses, a portion of liquidity and trader attention inevitably flows into the crypto sphere.
The reasons for the KOSPI crash are complex. Key factors include the escalation of geopolitical tensions in the Middle East, debates over whether the semiconductor market has peaked, and a sharp demand imbalance favoring certain stocks, creating a domino effect.
Wave of Forced Liquidations
A separate blow to the market came from a wave of forced liquidations (margin calls). From July 1 to 10, their volume reached 425.8 billion won (about $286 million). The peak occurred on July 9, when positions worth 142.2 billion won were forcibly closed, and on July 10, another 81.6 billion won.
This refers to so-called leveraged trades, where retail investors borrow funds from a broker. With a sharp price drop and the inability to timely deposit additional collateral, the broker forcibly sells assets at market price, often below the current one. As analysts note, with high volatility, even a small price movement can trigger an avalanche-like closure of large positions. Given the time lag between the margin call and the actual sale, new liquidation volumes are likely to continue coming in.
However, not everyone is pessimistic. Some experts believe the South Korean market is already close to its bottom. In their assessment, the current low stock valuations and higher corporate earnings base distinguish the present situation from previous crises, and there is no need to panic.
My comment: The surge in volumes on Upbit amid the stock market decline is a classic example of a "flight to quality," but in this case, cryptocurrency serves as the "safe haven." However, it is worth remembering that the crypto market itself is extremely volatile. This capital inflow could be a short-term speculative spike rather than a long-term trend. Investors should exercise caution and avoid succumbing to panic sentiments in either market.