Martial Law Declared Despite Bitcoin Crash, Global Markets ‘Calm’… Korea’s Influence Weakened

The concerns that the impact of the Korean virtual asset market has weakened due to the Bitcoin (BTC) plunge caused by the declaration of a state of emergency the previous day being limited to domestic exchanges. It is analyzed that the influence of the domestic market centered on individual investors has decreased as a large amount of institutional funds have flowed in through virtual asset spot exchange-traded funds (ETFs) this year. According to the industry on the 4th, around 10:30 pm the previous day, immediately after the declaration of martial law, the BTC price on Upbit plummeted by more than 30%, falling to around 88 million won. However, at the same time, the global BTC price based on CoinMarketCap remained stable at around $94,000. The sharp drop in domestic BTC prices did not affect the global market. The main reason for the weakening of the domestic market's influence on BTC prices is the spot ETFs launched in major countries such as the United States this year. While BTC trading around the world has been reorganized centered on institutional investors through spot ETFs, the domestic market is still mainly operated by individual investors, resulting in a decrease in its influence on global prices. In Korea, the legal status of BTC is unclear, so the launch and trading of BTC spot ETFs are limited. The issuance of corporate accounts for the purpose of virtual asset investment is also blocked, making it difficult for institutional investors to invest directly in BTC. As the global virtual asset market has grown significantly since the beginning of last month after the US presidential election, the domestic trading share has further shrunk. On the 4th, based on CoinMarketCap, the BTC trading volume of Upbit, the largest domestic exchange, accounted for only 2% of the total, and Bithumb, the second-largest exchange, accounted for 0.58%. "Unlike items with a significant influence of domestic exchanges such as XRP, BTC and Ethereum (ETH), for which spot ETFs have been launched, the influence of institutions is increasing," said Lee Seung-hwa, head of the Disfread Research Team. It is also analyzed that the impact of domestic issues on the global market was limited because foreign exchanges' business in Korea is difficult under domestic law. Currently, under the Special Financial Information Act (SFTA), the domestic business of foreign exchanges without a virtual asset service provider (VASP) license is prohibited. "The sharp drop yesterday was a special situation that lasted for about 150 minutes, limited to domestic exchanges, and the impact on the global market was limited because the trading of domestic individual investors was concentrated on domestic exchanges," said Kim Kyu-jin, CEO of Tiger Research. "It is true that the relative influence of the Korean market has somewhat decreased since the election of President Trump, but it is difficult to conclude that this is a weakening of market influence."