Although the current Bitcoin price rally is causing huge gains among investors, it is also hurting other financial sectors. In this last group, the stocks of small-cap Korean companies stand out, which will undergo a huge ebb in 2024.
Specifically, retail investors and more risk-tolerant capitals benefited from the volatility of the Kosdaq index. The latter tracks small market cap companies in the Asian country. However, redirecting these capitals towards cryptocurrencies is presented as a much more profitable business. This trend would be wreaking havoc throughout 2024 and it can be assumed that it will continue.
According to recent work by Bloomberg, retail investors want nothing to do with small company stocks in South Korea. So far this year, the Kosdaq has seen a -20% drop, while Cryptocurrency trading volume has increased exponentially.
Since Donald Trump won the presidential election in the United States, the price of BTC has returned +35%. In that same period, the Kosdaq shows negative numbers of -8%. In this way, the Bitcoin price rally related to Trump fever also harms entrepreneurs in other sectors, including innovation.
The rise in the price of Bitcoin in 2024 robbed Kosdaq of the capital of retail investors. Source: Bloomberg
Everything indicates that the Bitcoin rally will continue
For any analyst or investor, the BTC price push is one of the best news this year. However, this same reality is perceived as a black hole by the field of small-cap Korean companies.
As interest in cryptocurrencies grows, this market swallows up the capital of retail investors who were normally in other sectors. The dumping from the shares of small companies towards BTC causes a strong imbalance in the local financial market. This reality surely extends to other markets.
Some governments such as China banned trading with cryptocurrencies in 2021 and this was one of the reasons. According to them, the rise of Bitcoin is presented as a risk to the stability of the local financial market. The issue in Korea seems to escalate to the limit of obsession, according to the aforementioned media.
The data reveals that the volume on cryptocurrency exchanges even exceeds that of benchmark indices such as Kospi. Recently, regulators banned the approval of Bitcoin and Bitcoin Cash ETFs, as well as futures of these currencies on the local exchange. Precisely, the reason for this is the enormous fear of large-scale dumping in the Korean financial market.
In any case, for the Korean companies grouped in Kosdaq, the nightmare will continue. The Trump era begins on January 20 and great news is expected for the cryptocurrency market. In simple words, a weakening of the Bitcoin rally should not be expected, quite the opposite.
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