Update Dec. 8, 1:30 pm UTC: This article has been updated to add comments from TradeStation vice president Anthony Rousseau.
The disappearance of key market players and a liquidity crisis contributed to a $30,000 drop in Bitcoin prices on South Korean platforms after President Yoon Suk Yeol’s declaration of martial law.
On Dec. 3, Yoon imposed martial law during a live television address, citing a need to “eliminate anti-state elements” and address “threats posed by North Korea’s communist forces.”
The declaration triggered immediate market disruptions, with Bitcoin (BTC) on the South Korean exchange Upbit dropping to as low as 92 million won (about $65,000).
BTC/KRW activity on South Korea-based crypto exchange Upbit. Source: Upbit
One analyst attributed the sharp decline to a sudden disappearance of liquidity. According to trader Ltrd, the lack of active participants caused an imbalance between bids and asks, resulting in a 10% spread during the crisis.
Lack of liquidity sends BTC to $65,000 in South Korea
In an X thread, trader Ltrd said the drop would not be this brutal if the liquidity was normal. Still, they said that during the martial law declaration, “all the players just disappeared from the market.” They wrote:
“The reason is simple — it is shockingly hard to enter the Korean market and trade there. This means that only a few players can provide liquidity and arbitrage those discrepancies.”
South Korean traders paid the price for limiting the market to only a few players, according to trader Ltrd, who said the price volatility could have been mitigated with broader market maker participation.
Sell and buy amounts on Upbit. Source: Ltrd
The trader also highlighted massive sell pressure on all instruments behind the sudden drop. Despite this, they said the market overreacted, and the extreme price drop would not have happened if more liquidity providers had been participating.
In a statement sent to Cointelegraph, Anthony Rousseau, the vice president and head of brokerage solutions product management at trading platform TradeStation, explained that price fluctuations in regions like South Korea show how regional events can affect the asset’s price:
“During periods of local crisis or uncertainty, liquidity in active markets — such as South Korean exchanges — may experience sharper reactions due to factors like regulatory changes, market sentiment or exchange-specific dynamics.”
Despite this, the executive said the global Bitcoin market is robust, with liquidity distributed across different areas. “This global structure allows Bitcoin to absorb localized shocks without significant spillovers into broader markets, underscoring its resilience and maturing market infrastructure,” he added.
Related: South Korea’s Democratic Party agrees to delay crypto tax by 2 years
South Korean markets recovered back after martial law reversal
Hours after the martial law declaration, 190 lawmakers in South Korea’s parliament voted to nullify the martial law declaration. Yoon accepted the decision and lifted the order, easing tensions.
Following the reversal, Bitcoin prices rebounded, trading at around 135 million won (about $95,000) at the time of publication.
Market observers noted the temporary crisis highlighted the vulnerability of South Korea’s cryptocurrency markets to liquidity shocks, particularly during times of political instability.