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The political situation in South Korea is one of enormous uncertainty after the recent events of attempted martial law. The current war between the executive and legislative branches could provoke a civil conflict with unpredictable consequences. This volatile scenario leads to growing investor interest in reserve assets such as Bitcoin.
The context:
Although the Cold War ended 34 years ago with the fall of the Berlin Wall, that reality never applied to the Korean Peninsula. The division between communism and capitalism has been maintained since the civil war of 1950-53, which divided the country between North and South. To make this situation more unique, the war between the two sides was never officially ended, since both claim sovereignty over the entire peninsula.
Instead of a peace agreement, a ceasefire was signed that always hangs by a thread. This reality generated acute cross-propaganda of terror: in the North there was talk about the “threat of being a capitalist colony” and in the South about the “ghost of communism.” In this scenario, in the internal political life of South Korea, any dispute is seasoned with accusations of being agents of North Korea.
For left-wing political parties it must be tremendously hard to do politics; However, they managed to conquer parliament. How can the increase in interest in Bitcoin be explained in this context?
Why is interest in Bitcoin increasing in this context?
The political environment related to President Yoon Suk Yeol has kept the country in serious trouble for quite some time. The economic situation does not seem to be going well for the population, which is reflected in the impossibility of meeting basic financial goals.
In that sense, the odyssey of paying for health, education and rent (buying homes is almost impossible for average families) generated an enormous social crisis. Women in the country refuse to procreate under such an economic climate, causing an alarming drop in the birth rate.
The replacement generation in the labor market is in danger and the authorities intend to force women to procreate without guaranteeing stability. This led to the emergence of the left among political preferences due to its speeches in favor of the majorities. The feminist, labor and student movements became the impetus for leftists to dominate parliament.
For investors there is a clear situation: the South Korean bubble burst, prompting them to look for assets like Bitcoin.
Investors want nothing to do with local assets
Political instability and the uncertainty of the economy in the future due to the drop in the birth rate mean that the potential of local companies is zero. Thus, internal capitals do not see attractiveness in the country’s financial assets, which leads to an explosive growth in interest in Bitcoin and other cryptocurrencies.
As it was recently learned, the shares of South Korean small-cap companies, grouped in the Kosdaq, show red numbers of -20% in 2024. In that same period, the price of Bitcoin experiences +119.71%. But the situation is not only negative for small capitalization companies. The benchmark index, Kospi, also shows negative performance.
Donald Trump’s victory in the United States caused an increase in this trend. Thus, between November 5 and 28, Cryptocurrency exchanges saw a trading volume of $9.4 billion, while on the Kospi it was $7.7 billion, according to data compiled by Bloomberg.
Since Trump won the election, the Kospi performs at -3.4%. At the same time, an index that tracks the top 100 cryptocurrencies rises by +53%. The growing interest in Bitcoin and other currencies against local assets became stronger in the last few hours, following the crisis.
Cryptocurrency trading volume in South Korea exceeds stock indices. Source: Bloomberg
Is the left preparing to take control?
After more than 70 years of tight political control, the dominance of the right seems to be fracturing in South Korea. Parliament managed to annul the executive’s martial law decree and the next step could be the impeachment of President Yoon Suk Yeol.
This suggests that the left has all the conditions to capitalize and assume command. Even if they could have the support of the population, the markets obviously do not seem very happy about this possibility. The latter could lead to further bleeding in stock indices, especially with the unlimited supply that the authorities now promise.
The most conservative sectors try to stop the advance of the left with the accusation of being agents of North Korea (it is not clear if this is true or just propaganda). In any case, if the left manages to overcome the accusations that it intends to establish communism, its path to power could be a fact.
The combination of all these factors could lead to a situation of acute inflation of the won, which would bring a greater mass of capital to the cryptocurrency market.
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