South Korea's Crypto Markets Show Volatility

South Korea’s President spooked local crypto markets with an unexpected declaration of martial law earlier today that he has since reversed.

What’s the Scoop?

• Shut it Down: South Korean President Yoon Suk Yeol declared martial law on Tuesday in an unannounced late-night TV address for the first time in nearly 50 years in response to opposition attempts to impeach top national prosecutors and reject a government budget proposal.
• Widespread Restrictions: The instituted martial law plan banned all political activities, assemblies, and rallies; placed all media and publishing under control of the martial law command; and ordered all trainee doctors who had resigned in protest of government health care reforms back to work.
• Crypto Plunge: Although possession of crypto of crypto assets was not directly impacted by the decree, the martial law panic caused liquidity providers in isolated South Korean markets to freeze operations. Marginal sell pressure in this thin liquidity environment resulted in double digit drawdowns for practically every Won-denominated crypto pair within a matter of 30 minutes.

Bankless Take:

Crypto assets are highly volatile; when liquidity suddenly evaporates, prices can crash in dramatic fashion. Although the impacts of this event were brief and largely confined to South Korean markets, they should serve as a stark reminder of how unforeseen uncertainty can trigger sharp declines in token prices, irrespective of their underlying fundamentals – similar to the market turmoil experienced during the 2020 COVID crash.