Is South Korea Staring at Crypto Amid Bleak Economic Conditions?

• 1 The Asian country, South Korea, is facing challenges at its economic growth front. 
• 2 Yet, the cryptocurrency trading trend continued as it has for the past several years. 

Cryptocurrencies are becoming popular across the world and people are stepping into the burgeoning asset class, depending upon the regional regulations. Across the countries, South Korea has emerged to be the leading player in terms of people showcasing more interest towards the cryptocurrencies. 

The swelling cryptocurrency trading volumes over the South Korean crypto exchanges could make the point. In contrast, the economic growth of the fourth-largest Asian economy is reported to stay relatively slow. 

Reuters reported its economists’ poll found that two major sectors responsible for about 50% of the economic activities in the country got hit during the last quarter. The country lagged behind in exports and the higher interest rates made a considerable impact on private consumption. 

The South Korean central bank, Bank of Korea (BOK) was reportedly among the first to run for hiking interest rates and raised them in August 2021. The tightening continued till February and the bank ended up raising the rates to 300 basis points overall.

Though the efforts brought fruitful results as the targeted inflation came down to 2%, the interest rates are likely to stay intact until the inflation goes below. 

In addition to the internal factors, external factors such as export also affected the economic activities in South Korea. The country depended upon China for its trade, but the expectations from the biggest Asian economy could not be achieved due to the Covid-19 pandemic and its following lockdowns. 

According to Reuters, the projected economic growth in China is expected to remain 5.5% for 2023 and 4.8% for 2024. Given the heavy dependency on “the world’s factory” ended up affecting many countries worldwide when it shut down for a while, South Korea was no exception. 

Crypto, a Ray of Shine for South Korea

Amid the bleak economic growth, the question arises if the Asian economy could leverage its booming crypto trading activities. Even in the past, the demand in the country for digital assets was relatively higher than anywhere in the world. The circumstances resulted in the phenomenon of “Kimchi Premium” and the price of Bitcoin (BTC) to trade in South Korea as high as 40% from the price in the United States. 

Cryptocurrencies turned out as an investment vehicle in the country for those who are unable to venture into costly assets like real estate and stocks, etc.