Today, December 3, 2024, South Korean President Yoon Suk Yeol declared martial law. Hours later, he had to reverse the measure by decision of Parliament.
Although the decision was motivated by the opposition’s alleged ties to North Korea, It was seen by many as a “self-coup d’état” and harmed the financial markets, as CriptoNoticias reported minutes ago.
In this context, The price of bitcoin on the exchanges in that country had a significant drop. Journalist Colin Wu, specialized in cryptocurrencies and particularly in the Asian market, commented: «All South Korean won trading pairs on South Korean platforms suddenly began to plummet. The price of bitcoin fell to $66,500, and that of XRP to $1.16.
The reason for this behavior of bitcoin and cryptocurrencies, according to Wu, is that “news of martial law caused panic selling, excessive platform traffic caused outages, and a lack of market makers prevented prices from rising.” “They will synchronize in a short period of time.”
In this panorama of uncertainty, an arbitration opportunity was openeda term that in the financial field refers to the possibility of taking advantage of price differences for the same asset in different markets.
As mentioned, bitcoin was quoted at $66,500 on South Korean platformswhile its international price remained above $90,000. This price gap allowed traders who acted quickly to buy bitcoin at a lower price in South Korea and sell it in international markets, making a quick and almost certain profit.
As can be seen in the following graph, taken from the South Korean exchange Upbit, BTC recovered its “normal” price in a few hours. But, during that time window, speculators who were alert to trade at the right time were able to take advantage of the opportunity.
A curious fact that many are unaware of is that Sam Bankman-Fried (the founder and former CEO of the FTX exchange), years ago made much of his fortune through financial arbitrage with bitcoin, although not in South Korea but in the Japanese market.
South Korea could continue generating impact on bitcoin
Although BTC has already recovered the “normal” market value on South Korean exchanges, what happens in that country could continue to impact bitcoin. The thing is that, as CriptoNoticias announcedthe South Korean government promised “unlimited liquidity” to try to calm the financial tension caused by political conflicts.
If such liquidity were indeed released it would have inflationary effects for the won (leading to currency devaluation) and possibly bullish effects for bitcoin, cryptocurrencies, and also stocks. This is because some of this capital can flow into markets considered “risky” in search of high returns, driving up their prices.
