Throughout the past nine years, Bitcoin has suffered four 80 percent corrections and each drop was followed by a 300 to 1,000 percent rallies. But, despite the historical evidence of market recovery, it may be difficult to expect investors in the crypto exchange market of South Korea to recover anytime soon.
Analysts in the traditional finance sector of South Korea often describe the local market as a copper pan, because of its tendency to heat up at an unprecedented rate and cool down relatively fast afterwards.
In December of last year, crypto was undoubtedly the most popular topic of discussion in the South Korean market and the popularity of digital assets reached to a point in which national television operators and mainstream media outlets were hosting regular debates on the consensus algorithms, decentralized nature, and advantages of every blockchain network in the market.
At the time, investors in all age groups including teenagers, young adults, university students, full-time employees in their 30s, and middle-aged individuals were all heavily invested in crypto. The majority of investors in the sector secured large loans to invest in the market, setting up their properties as collateral.
In an interview with Nathaniel Poppers of New York Times, one investor, a 45-year-old mother who teaches in the outskirts of Seoul, said that she had invested $90,000 in crypto, expecting large returns to finance her struggling household. Instead, the price of Bitcoin crashed 80 percent and in eight months, Kim Hyon-jeong was left with less than $20,000.
“I thought that cryptocurrencies would be the one and only breakthrough for ordinary hardworking people like us. I thought my family and I could escape hardship and live more comfortably, but it turned out to be the other way around,” she said.
While many analysts and investors are still extremely optimistic in the long-term growth of the cryptocurrency market, it is the stories of investors like Kim that are avoided by the majority. Many similar cases have occured in South Korea, as investors took massive debt and loan to invest in the emerging asset class.
In hindsight, investing with a loan in a highly volatile market that is still at its infancy is a very risky investment method. But, when everyone in the region including the mainstream media is discussing crypto as the future of money, it is difficult to avoid it.
The market of South Korea was so heated that exchanges had no more supply of Bitcoin and other major cryptocurrencies to sell to investors that were increasing the demand for the asset class. At one point, the price of Bitcoin, which peaked at $19,500 in the global market, reached $24,000 in the South Korean market.
The majority of investors in South Korea that have seen 70 to 80 percent losses were emotionally invested in cryptocurrencies, considering digital assets as the pathway towards a better life with financial stability.
Instead, within eight months, investors were left with less than 20 percent of their money and a loan to pay off, in a worse position.
As the price of cryptocurrencies recover to their previous levels and potentially achieve new all-time highs, the market will ultimately recover, but those investors that experienced the biggest financial losses in their lives, will not be able to recover in the short-term.