**Military Lockdown Shakes Up South Korean Crypto Market: $33 Billion Sell-Off Wave and Native Project Exoduses**
Original Article Title: Martial law in South Korea and the crypto market outlook
Original Source: Tiger Research Reports
Original Translation: Deep Tide TechFlow

Key Points Summary:
· Market Volatility: The announcement of martial law triggered a massive sell-off on South Korean cryptocurrency exchanges, with a total sell-off amounting to around 33.3 billion USD. The price of Bitcoin dropped to 62,300 USD, with the local market recording the highest trading volume globally at one point.
· Investor Exodus: Due to price fluctuations and system failures in local exchanges, South Korean investors are expected to pivot to overseas exchanges and DeFi platforms.
· Industry Contraction: Political instability is prompting South Korean blockchain projects to move overseas. Key legislation, such as the Virtual Asset User Protection Law, may be delayed as a result.
1. Introduction

Source: Yonhap News
Last night, President Yoon Suk-yet suddenly announced and lifted martial law, causing a shock to South Korea's cryptocurrency market. Bitcoin's price on South Korea's largest exchange Upbit dropped to 62.3K USD. Upbit and Bithumb, the two major South Korean exchanges, saw 24-hour trading volumes of 26.9 billion USD and 6.4 billion USD, respectively, reaching their highest levels this year. This reflects the large-scale sell-off by South Korean investors following the declaration of martial law. During this period, South Korean exchanges briefly became the highest-volume market globally, highlighting the extreme volatility of its market.
2. Decline in Trust in the Won Assets and Rise in Cryptocurrency Demand

The martial law event severely eroded trust in won-denominated assets. With foreign capital exiting, the stock and bond markets may become even more volatile. As a result, investors are gradually shifting their focus to decentralized assets such as cryptocurrency.
Against the backdrop of rising geopolitical risks, investors are turning to cryptocurrency to protect their assets. Major cryptocurrencies like Bitcoin are garnering attention for being beyond government control. In past crises such as the Hong Kong protests and the Russia-Ukraine conflict, cryptocurrency has been seen as a safe-haven asset.
3. The Double-Edged Sword of Stringent Regulation and the Acceleration of Exchange Exodus
South Korean cryptocurrency exchanges maintain high security through strict travel rules and KYC regulations. The enactment of designated financial transaction information reporting and usage laws has strengthened anti-money laundering (AML) measures and enhanced investor protection. These efforts have positioned South Korea as a leader in regulatory compliance.

Source: Upbit
However, the market crash revealed the double-edged sword effect of stringent regulation. The strict rules have sustained a Kimchi Premium, widened the price gap with global markets, and made it difficult for investors to make rational decisions.
The significant price fluctuations and system instability of local exchanges have eroded investor trust. With overnight trading volumes reaching $33.3 billion, servers of Upbit and Bithumb experienced crashes. Unlike overseas exchanges, this instability has made local exchanges appear unreliable.
These issues are expected to accelerate South Korean investors' shift to overseas exchanges and DeFi platforms. Binance and Coinbase provide a stable trading environment and diverse financial products, making them the preferred choice for South Korean investors.
4. Acceleration of South Korean Blockchain Project Exodus
Due to political instability, the investment environment for South Korean blockchain projects has been affected. Many large projects have already moved overseas, and this trend is expected to continue. Nexon's blockchain division Nexpace has relocated to Abu Dhabi, Klaytn and LINE Finschia's Kaia Foundation have moved to Singapore, and Wemade's Wemix has shifted to Dubai. These companies have chosen blockchain-friendly countries to avoid South Korea's regulatory uncertainty and political risk. More projects are expected to move to Singapore and the UAE, where regulations remain clear and stable.
The overseas migration of blockchain startups has raised concerns about talent drain. This trend could weaken South Korea's competitiveness in the blockchain field. Against the backdrop of rapid development in Web3 and blockchain technology, talent outflow may have a long-term negative impact on South Korea's technological advantage. This brain drain has intensified the industry's sense of crisis.
Furthermore, the impeachment issue may delay the progress of key legislation. Laws such as the Virtual Asset User Protection Act currently being discussed in the National Assembly may face delays. These delays could further hinder the institutionalization process of South Korea's cryptocurrency market.
5. Conclusion
The martial law incident exposed structural weaknesses in the South Korean cryptocurrency market. Overnight, $333 billion in value vanished from sight, with major exchanges’ servers crippled. The market experienced extreme price volatility, with significant price discrepancies compared to global exchanges. These events underscored political risks in the market and the fragility of the current trading system under pressure.
In the short term, market instability is expected to persist. However, with appropriate institutional improvements and system enhancements, this crisis could also serve as a turning point. These efforts will help strengthen the stability of the South Korean cryptocurrency ecosystem and drive its globalization. The future trajectory is worth close monitoring.
You may also like
AI Trading's Ultimate Test: Empower Your AI Strategy with Tencent Cloud to Win $1.88M & a Bentley
AI traders! Win $1.88M & a Bentley by crushing WEEX's live-market challenge. Tencent Cloud powers your AI Trading bot - can it survive the Feb 9 finals?

Russia’s Largest Bitcoin Miner BitRiver Faces Bankruptcy Crisis – What Went Wrong?
Key Takeaways BitRiver, the largest Bitcoin mining operator in Russia, faces a bankruptcy crisis due to unresolved debts…

Polymarket Predicts Over 70% Chance Bitcoin Will Drop Below $65K
Key Takeaways Polymarket bettors forecast a 71% chance for Bitcoin to fall below $65,000 by 2026. Strong bearish…

BitMine Reports 4.285M ETH Holdings, Expands Staked Position With Massive Reward Outlook
Key Takeaways BitMine Immersion Technologies holds 4,285,125 ETH, which is approximately 3.55% of Ethereum’s total supply. The company…

US Liquidity Crisis Sparked $250B Crash, Not a ‘Broken’ Crypto Market: Analyst
Key Takeaways: A massive $250 billion crash shook the cryptocurrency markets, attributed largely to liquidity issues in the…

Vitalik Advocates for Anonymous Voting in Ethereum’s Governance — A Solution to Attacks?
Key Takeaways Vitalik Buterin proposes a two-layer governance framework utilizing anonymous voting to address collusion and capture attacks,…

South Korea Utilizes AI to Pursue Unfair Crypto Trading: Offenders Face Severe Penalties
Key Takeaways South Korea is intensifying its use of AI to crack down on unfair cryptocurrency trading practices.…

Average Bitcoin ETF Investor Turns Underwater After Major Outflows
Key Takeaways: U.S. spot Bitcoin ETFs hold approximately $113 billion in assets, equivalent to around 1.28 million BTC.…

Japan’s Biggest Wealth Manager Adjusts Crypto Strategy After Q3 Setbacks
Key Takeaways Nomura Holdings, Japan’s leading wealth management firm, scales back its crypto involvement following significant third-quarter losses.…

CFTC Regulatory Shift Could Unlock New Opportunities for Coinbase Prediction Markets
Key Takeaways: The U.S. Commodity Futures Trading Commission (CFTC) is focusing on clearer regulations for crypto-linked prediction markets,…

Hong Kong Set to Approve First Stablecoin Licenses in March — Who’s In?
Key Takeaways Hong Kong’s financial regulator, the Hong Kong Monetary Authority (HKMA), is on the verge of approving…

BitRiver Founder and CEO Igor Runets Detained Over Tax Evasion Charges
Key Takeaways: Russian authorities have detained Igor Runets, CEO of BitRiver, on allegations of tax evasion. Runets is…

Crypto Investment Products Struggle with $1.7B Outflows Amid Market Turmoil
Key Takeaways: The recent $1.7 billion outflow in the crypto investment sector represents a second consecutive week of…

Why Is Crypto Down Today? – February 2, 2026
Key Takeaways: The crypto market has seen a downturn today, with a significant decrease of 2.9% in the…

Nevada Court Temporarily Bars Polymarket From Offering Contracts in the State
Key Takeaways A Nevada state court has temporarily restrained Polymarket from offering event contracts in the state, citing…

Bitcoin Falls Below $80K As Warsh Named Fed Chair, Triggers $2.5B Liquidation
Key Takeaways Bitcoin’s price tumbled below the crucial $80,000 mark following the announcement of Kevin Warsh as the…

Strategy’s Bitcoin Holdings Face $900M in Losses as BTC Slips Below $76K
Key Takeaways Strategy Inc., led by Michael Saylor, faces over $900 million in unrealized losses as Bitcoin price…

Trump-Linked Crypto Company Secures $500M UAE Investment, Sparking Conflict Concerns
Key Takeaways A Trump-affiliated crypto company, World Liberty Financial, has garnered $500 million from UAE investors, igniting conflict…
AI Trading's Ultimate Test: Empower Your AI Strategy with Tencent Cloud to Win $1.88M & a Bentley
AI traders! Win $1.88M & a Bentley by crushing WEEX's live-market challenge. Tencent Cloud powers your AI Trading bot - can it survive the Feb 9 finals?
Russia’s Largest Bitcoin Miner BitRiver Faces Bankruptcy Crisis – What Went Wrong?
Key Takeaways BitRiver, the largest Bitcoin mining operator in Russia, faces a bankruptcy crisis due to unresolved debts…
Polymarket Predicts Over 70% Chance Bitcoin Will Drop Below $65K
Key Takeaways Polymarket bettors forecast a 71% chance for Bitcoin to fall below $65,000 by 2026. Strong bearish…
BitMine Reports 4.285M ETH Holdings, Expands Staked Position With Massive Reward Outlook
Key Takeaways BitMine Immersion Technologies holds 4,285,125 ETH, which is approximately 3.55% of Ethereum’s total supply. The company…
US Liquidity Crisis Sparked $250B Crash, Not a ‘Broken’ Crypto Market: Analyst
Key Takeaways: A massive $250 billion crash shook the cryptocurrency markets, attributed largely to liquidity issues in the…
Vitalik Advocates for Anonymous Voting in Ethereum’s Governance — A Solution to Attacks?
Key Takeaways Vitalik Buterin proposes a two-layer governance framework utilizing anonymous voting to address collusion and capture attacks,…