The price of Bitcoin tumbled Tuesday on Upbit, South Korea’s largest crypto exchange, falling as low as $61,600 as the country’s president, Yoon Suk Yeol, declared martial law.
The measure, which was announced by Yoon in a late-night television address, came alongside accusations that South Korea’s main opposition party was sympathizing with North Korea, per CNN. Yoon reportedly accused the party of “clear anti-state behavior aimed at inciting rebellion.”
Priced in South Korean won, Bitcoin’s value fell as low as ₩88,266,000 on Upbit, darting down 33% from ₩132,429,000 in less than 30 minutes. Since then, Bitcoin’s price has slightly recovered on Upbit, valued around ₩127,000,000 worth—about $88,600 as of this writing.
Meanwhile, the price of Bitcoin clocked in at $95,900, falling 1% over the past day, according to CoinGecko. As of this writing, that meant that Bitcoin traded at a 8% discount on the South Korean exchange, not long after the country’s president declared martial law.
Bitcoin’s discounted price on the South Korean exchange reflects liquidity trapped within a centralized venue, Bitwise Senior Investment Strategist Juan Leon told Decrypt in a statement. Even though Bitcoin is a decentralized asset that trades around the clock, he said dislocations can still arise when “idiosyncratic situations in a locality” create sudden confines.
Citing “a temporary increase in traffic,” Upbit warned users Tuesday that its services had been delayed, according to a blog post translated by Decrypt. In an update, however, the exchange said the issue had been resolved, while apologizing for any inconvenience caused to its customers.
The price of the Ripple-linked XRP also saw a pronounced fall on Upbit as the South Korean president levied the accusations. While the price of XRP has since recovered to ₩3,400 ($2.37) on Upbit, it fell as low as ₩1,623 (1.13) on the exchange—a sudden 52% drop in value.
Per CoinGecko, XRP traded hands at $2.52 Tuesday. On Upbit, the discrepancy represented a 6.3% discount for the token that’s been one of the market’s best performers in recent weeks.
The South Korean won’s exchange rate to the U.S. dollar also fell by nearly 3% following the announcement, per Google Finance.
As South Korea’s president announced martial law, Upbit’s trading volume surged, rising 32% over the past day to $23 billion, according to CoinGecko. Representing nearly a third of its trading volumes, around $6.5 billion worth of XRP had traded hands on the exchange.
A flurry of trading activity among South Korean traders was also reflected on Bithumb, an exchange registered in South Korea. The exchange saw trading volumes rise 20% Tuesday to $4.6 billion as $1.4 billion in XRP traded hands, according to CoinGecko.
As digital assets like Bitcoin traded at a discount on South Korean crypto exchanges Tuesday, the declaration of martial law effectively created an inverse “Kimchi Premium.” Named after the popular South Korean dish, the phenomenon has a years-long history and reemerged this year.
Tied to South Korea’s strict capital controls, the Kimchi Premium is largely based around how difficult it is to move money in and out of the country. As analysts pointed to a resurgence of South Korean retail traders this year, the premium ran as high as 10% for Bitcoin in March.
In 2018, the Kimchi Premium for Bitcoin once ran as high as 54%, but historically, it’s been difficult for traders to capitalize on. While the dynamic once created a lucrative arbitrage opportunity for Bitcoin sellers in South Korea, it worked in the opposite direction Tuesday.
Edited by Andrew Hayward
Editor’s note: This story was updated after publication with additional details.
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