The South Korean stock market is experiencing another wave of sell-offs, and this has a direct, almost mirror-like impact on the cryptocurrency sector. While the KOSPI index is breaking through further support levels, trading volumes on the largest local exchange, Upbit, are showing explosive growth.
On July 14, trading on Upbit surged to $4.27 billion per day. This is a staggering 1,426.2% higher than the previous day's figures. Such a sharp jump is no coincidence. It is a classic pattern of capital flow: when traditional markets collapse, investors seek refuge, but in this case, not in cash, but in alternative assets. We are seeing South Korean retail traders actively switching to cryptocurrency, using it as a tool for speculative trading amid high volatility.
Depth of the KOSPI Decline
The KOSPI index itself lost 4% in a day, dropping to 6,534.34 points. Shares of semiconductor industry giant SK Hynix plunged more than 7%. From its peak on June 19, the index has fallen by 27.47%.
The reasons for the crash are fundamental in nature. This includes the escalation of the geopolitical situation in the Middle East, debates over whether the semiconductor market has reached its cyclical peak, and a demand imbalance favoring certain leveraged stocks. All of this has triggered a wave of forced liquidations.
Forced Liquidations: The Domino Effect
From July 1 to July 10, the volume of forced sales on the South Korean market reached 425.8 billion won (approximately $286 million). The peak occurred on July 9, when securities worth 142.2 billion won were liquidated, and on July 10, another 81.6 billion won.
This refers to margin positions, where brokers forcibly close trades of retail investors who failed to deposit additional collateral in time. As noted by Mirae Asset analyst Kim Seok-hwan, with high volatility, even a small price movement can trigger a cascade of liquidations. Due to the time lag between the margin call and the actual sale, new volumes continue to flow into the market for forced execution.
However, not everything is so pessimistic. LS Securities analyst Jeong Da-un believes that the current situation is fundamentally different from previous crises. A higher profit base and already achieved low valuation levels indicate that the market is close to its bottom.
Expert Commentary: The surge in volumes on Upbit amid panic is not necessarily a bullish signal for cryptocurrencies. Rather, it is evidence that retail investors are seeking any opportunity to make money, abandoning the sinking ship of KOSPI. Until the traditional market finds its bottom, we will observe heightened but extremely nervous activity in South Korea's crypto sector, which could result in local price anomalies.