Virtual Asset Market with Global Market Characteristics

With the recent rapid change in the political environment in Korea, virtual assets are attracting attention as an alternative to domestic investment.

Amidst the recent political turmoil in Korea, virtual assets have emerged as an alternative investment option for domestic investors seeking to diversify their portfolios. This interest stems from the fact that virtual assets, unlike traditional stocks or bonds, are traded simultaneously on exchanges around the world, offering investors a way to mitigate the risks associated with a specific country or region.

This characteristic of virtual assets is particularly relevant in the context of Korea's political environment, which has had a significant impact on the domestic stock market. Following the declaration of emergency martial law on December 3, bitcoin prices on Korean exchanges plummeted sharply within hours, while prices on foreign exchanges remained largely unaffected. This price disparity, known as the "kimchi premium," quickly narrowed as the situation in Korea stabilized.

As a result of this phenomenon, some investors have speculated that virtual assets could serve as a hedge against domestic economic or political risks, leading to increased interest in using these assets for investment immigration. However, market experts advise against making hasty investment decisions under the guise of investment immigration, as virtual assets also come with inherent disadvantages that should be carefully considered.

One of the main drawbacks of virtual assets is their around-the-clock trading, which makes them susceptible to immediate price fluctuations in response to specific events or incidents. This volatility, coupled with the potential for impulse investments, poses a significant risk for investors.

Another factor to consider is the varying liquidity of different virtual assets, which can impact the ease and speed of executing trades. For instance, while bitcoin is highly liquid and can be traded quickly, newer and more volatile virtual assets may experience delays or difficulties in executing large trades.

To mitigate these risks and maximize their investment potential, experts recommend focusing on older and more established virtual assets that have maintained a presence in the market for an extended period of time, as opposed to newer and more volatile virtual assets. These older coins, such as bitcoin, typically have a higher volume of transactions and a longer track record, making them more suitable for large-scale investment strategies.

Virtual Asset Market with Global Market Characteristics

Following the declaration of emergency martial law in Korea, the domestic virtual asset market experienced a wild ride, with prices fluctuating drastically within a short span of time. At 10:30 p.m. on December 3, as the martial law was announced, bitcoin prices on Korean exchanges plummeted sharply, dropping from 130 million won to 88 million won in a matter of hours. This price disparity, known as the "kimchi premium," quickly widened to -40 percent.

Meanwhile, bitcoin prices on foreign exchanges remained largely unaffected by the news, fluctuating within a narrow range. This disparity in pricing led to a scenario where investors could purchase bitcoin on Korean exchanges at a lower price and quickly transfer it to foreign exchanges to sell at a higher price, generating substantial profits through arbitrage trades.

This phenomenon occurred because virtual assets such as bitcoin are not only traded in Korea but are simultaneously available on exchanges around the world. When bitcoin prices in a specific country decrease due to a particular event or incident, investors can purchase the asset at a lower price and quickly transfer it to another exchange for sale at a higher price, capitalizing on the price disparity through arbitrage transactions.

As a result of this interconnectedness, virtual assets tend to maintain nearly identical prices around the world. Although exchanges are located in each country, including Korea, the market itself operates on a global scale.

Benefits of Global Investment and Quick Response to Foreign Exchange Losses

The global nature of the virtual asset market offers several benefits to domestic investors. Firstly, these assets can be quickly liquidated upon sale thanks to uninterrupted operation and real-time settlement.

In the case of stocks, investors typically receive cash two days after pressing the sell button. However, virtual assets are settled in real time for both buying and selling, allowing investors to receive coins and cash immediately. Real-time settlement continues at 12 p.m. as well as from 9 a.m. to 3:30 p.m. during the stock market operating hours.

Additionally, despite being a global market, virtual assets also provide the advantage of being able to respond quickly to foreign exchange losses. Since bitcoin's base price is actually the dollar, there are price fluctuations depending on the value of the dollar, but it can respond quickly with real-time settlement.

When trading U.S. stocks, there is no exchange loss or foreign exchange gain due to settlement time. In fact, you don't have to keep the exchange rate in mind because you can proceed with the trading considering only the bitcoin market price or forecast.

However, it is important to note that the entire market responds quickly to regional shocks because they are traded globally. The emergency martial law incident also served as an excuse for the entire virtual asset market to be adjusted, although the virtual asset market in Korea quickly recovered the kimchi premium.

Previously, tightening regulations from the U.S. was a factor that dampened the global virtual asset market. The fact that