South Korean financial authorities have banned short-selling until next June. The Korean tech index (KOSDAQ) posted its largest single-day gain in history, but the move begs the question: is crypto the only free marketplace?
JUST IN: The Korean tech index jumped 12% today after South Korea announced that short selling is banned until June 2024.
— The Kobeissi Letter (@KobeissiLetter) November 6, 2023
The index just posted its largest single-day gain in history.
This comes after the index was down a massive ~32% since July 26th.
To put this in… pic.twitter.com/Gku8PWnmDW
The stated intention of the measure is to eliminate naked short selling, a practice that is already illegal in Korea – involving shorting shares without actually borrowing them, but the ban will apply to all short selling.
Short sellers provide additional liquidity and act as an important check on markets by aiding in price discovery and making markets efficient. Banning the short selling may translate to short-term gains, but only true improvement in economic conditions can lead to a sustainable rebound over the long term.
While South Korea currently stands alone in its decision to impose an outright ban on short selling, the move could foreshadow the desire of global financial authorities to prop up markets by imposing restrictions on what investors can do with their capital.
Traditional financial systems, which imbue nation-state regulators with the power to unilaterally and arbitrarily restrict free markets, come in stark contrast to permissionless blockchains. For the Korean retail investors who lack access to international markets and have suddenly lost the ability to hedge against falling prices, this distinction is now painfully evident, and the proposition of transacting onchain just became all-the-more alluring.