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“It’s not safe right now. I gotta tell everybody to get out of the market,” says Bobby Kim mid-interview as he frantically posts to his Twitter page and Naver Band chat rooms about the looming downturn of Bitcoin. As a trader and adviser on Bitcoin Seoul, he has seconds to warn his subscribers and followers to buy or sell. The market gets increasingly tricky to read when banks swoop in to buy big on the dip, he says. Later that day, July 25, the market dropped 10% before rebounding.
Investing in digital currencies is a 24-hour roller coaster, and South Koreans appear to be riding that thrill. Even the government and major banks are in on the action. The price of Bitcoin is skyrocketing due to a stronger demand from Asia, and South Korea is the third-largest market in the world.
“When things start going to the moon, Koreans buy more than everyone else. It’s a much more extreme fluctuation,” says Kim.
Coinone
Korea’s volatile Ethereum market.
But Koreans have a particular taste for Ethereum, a fever that drove the digital coin’s price to a 30 percent premium in the country in June, local fintech experts say. Korea, home to three of the world’s top five exchange houses for Ethereum, pushes 35-40% of the coin’s global trade. Considering the other global top 10 exchanges use major currencies like dollar, Chinese yuan and Bitcoin, Ethereum trade through the Korean won — a currency used by only 50 million people in the world — could be the most concentrated per capita.
Elaine Ramirez
Three of the top five Ethereum exchanges are Korean. They account for nearly 40% of the world’s trade.
“People are crazed over it. Grandpas and grandmas come to our office lobby and say they want to put half a billion won ($447,000),” says Steve Lim, CEO of digital exchange startup Coinone. “We ask them how they heard about us, and they say, ‘I heard about you through a friend who invested a couple thousand and made a killing, and I want to do it too’ … but they have no idea how to use the app or email.”
A perfect storm
The fever over Bitcoin and Ethereum is a result of a perfect storm of conditions. Local investment options have been focused primarily on real estate and the domestic stock market, notes Lim. But both those markets are getting squeezed. Real estate has been overheating as prices and interest rates rise.
And the stock market just got a lot more cumbersome, notes Lee Seung-gun, president of the Korea Fintech Association and CEO of Viva Republica, which makes the popular payments app Toss. Since March, investing into derivatives like put options now requires hefty individual investor certification including 30 hours of training and 50 hours of simulated transactions, a turn-off for traders, he says.
Read more: How Initial Coin Offerings Fueled A $100 Billion Crypto Bubble
With such limited opportunities to flip a buck — even most gambling is illegal — the risk-takers are ready to pour hot money into the digital currency market.
“They looked into other assets with high volatility and Bitcoin was the perfect one,” Lee says. “So high-risk traders put their money into the Korean Bitcoin market and it went up like crazy. Once people saw that, they just poured their money in.” The appetite for Ethereum soon followed.
Elaine Ramirez
The price of Ethereum is higher in Korean won.
Plus, while desktop internet banking is notoriously painful, mobile transfers are instantaneous with no holding time at the bank. With high mobile penetration, world-leading 4G and a densely packed population where trends and news spread like wildfire, Korea is the perfect test bed for cryptocurrencies, says Lim.
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