Analysis: The positive correlation between South Korean stock index and BTC price has been broken, with funds shifting from the stock market to the crypto market

Since the beginning of this year, under the backdrop of a strong dollar, Asian stock markets have shown mixed performances. Some have achieved bull markets in local currency terms at the cost of currency depreciation, while others have sacrificed part of their stock market gains for relatively stable exchange rates. Only South Korea is an exception. In won terms, South Korea's KOSPI index has fallen by 10.0% cumulatively this year; considering the decline in the won, KOSPI priced in dollars has dropped by 18.9%, making it Asia's weakest.

From a capital flow perspective, since the second half of this year, only institutions in South Korea are maintaining net purchases in stocks; households have been continuously reducing their buying.

Analysts believe that much of the money withdrawn from stocks by Korean residents has gone into "speculating on cryptocurrencies." According to data from the Bank of Korea (BOK), as of November, there were 15.59 million domestic cryptocurrency investors in South Korea, an increase of 610 thousand from last month. Currently, 30% out of South Korea’s population of 51 million are involved in cryptocurrency trading. The average daily trading volume on South Korea's five major cryptocurrency exchanges jumped from KRW 3.4 trillion in October to KRW 14.9 trillion in November—more than quadrupling.

Koreans have always been keen on investing in cryptocurrencies: during the first wave bull market for cryptocurrencies back in 2017 about 5% participated; during the second round bull market in 2021 about 10% participated; now this proportion has expanded to reach around 30%. Historically though overall correlation between Korean stock indices and Bitcoin prices was positive until October when such positive correlation got completely broken down according to Wall Street Insights.