The South Korean government has repeatedly mentioned to cryptocurrency traders in the country that cryptocurrency trading is similar to gambling. This is because cryptocurrency cannot be considered as a legal tender or a form of currency because they are not a reliable form of storage. In fact, the South Korean government stated that these are simply virtual tokens. Due to the speculation mania which is ongoing in the country; the South Korean government is even considering to shut down the exchanges operating within their borders. When this announcement was made in January 2018, it shocked the investors, and it causes a price drop in the cryptocurrency market.
Of course, the price drop can’t be attributed to that announcement alone, but there is a reason to believe that South Korea plays a major role in the cryptocurrency market. When the South Korean government made the announcement, they directed this announcement especially to those young and old people that are investing in the cryptocurrency market without knowing the risks of doing so. When this group of people saw the price of cryptocurrencies such as Bitcoin going up, they immediately tested the water by investing in the market without thinking of the consequences of doing it.
Young people are the biggest fans
When it comes to cryptocurrencies in South Korea, the biggest group of investors come from young people. For these group of people, they saw cryptocurrencies as a way out so that they don’t have to work overnight and struggle to earn money. It quickly became apparent to them that cryptocurrency could be a way out from their financial troubles. This notion was mirrored across the nation as South Korean cryptocurrency transactions took up nearly 30% of the global cryptocurrency trading.
The average age of people trading in the cryptocurrency market is from the 20s and 30s. On top of that, South Koreans also trade a considerable amount of Bitcoins. Young people also took the chance on trading into alternative coins because they saw potential in making a profit faster compared to Bitcoin.
The reason behind the cryptocurrency infatuation
Young Koreans are attracted to cryptocurrency market for a simple reason. They saw that the cryptocurrency market provided an opportunity for them to have financial freedom. In Korea, the country has suffered from an economic slowdown which resulted in more young people is being unemployed. On top of that, some are overqualified for jobs, and it causes underemployment. The total number of unemployed people in Korea are about 1 million people and 40% of them are young people.
Due to the global financial crisis, young Koreans had to consider how they are going to improve their economic condition. Just about 50 years ago, Koreans were struggling as the generation at that time were very poor. Some of them could barely survive with the food regime provided by the United States and other countries. However, the country managed to turn its economy condition around by its successful economic development policies. As a result of this, Korea quickly turned into a high-tech IT society where nearly every one of its citizen has a smartphone.
Also, parents are more likely to spend on their children’s education to improve economic success and social status within the society. In fact, the average Korean is educated up till the university level. There are plentiful of college graduates within the country which is a result of families wanting their children to have a better life. Despite having a high-quality workforce, the job market has significantly narrowed down which creates serious social problems. On top of that, getting into universities is also increasingly difficult because everyone wants to get into them.
After graduating, graduates find it difficult to find jobs as well because applying for jobs is very difficult. These young Koreans are mostly interested in working at major companies in Korea. Even if they get accepted in the job, the average length of tenancy within the company will only be up to 7 years. Therefore, young people feel increasingly pressured by what is going on as the social structural problem has led to an increase in unemployment.
Then, came cryptocurrencies.
So, you can only imagine what happens when the media started telling stories about people are willing million to billion worth of Korean won from their investments. As young people are increasingly connected to the social media and different type of media platforms, a lot of them caught on the news. In fact, people in middle school also trade cryptocurrencies. A lot of them jumped onto the cryptocurrency trend and traded cryptocurrencies.
The Korean government is accepting cryptocurrencies
At the end of 2017, it seemed like the Korean government was going to ban the trading of cryptocurrencies. However, the government made an official announcement that it was determined to implement the blockchain technology to different areas of the country. This includes their electronic voting system, real estate industry, a management system for animal services and an online platform to support youth activities. On top of that, the government is preparing an allocation of funds especially for start-ups that develop a solution for these blockchain applications.
However, something good came out of the speculations which are ongoing in Korea as the Korean government is now implementing the usage of blockchain in their country. Therefore, the government is encouraging the development of blockchain to move from just being an infrastructure for supporting speculative cryptocurrencies to a find more practical applications in real life.
One of the reasons that this change happened was because a lot of young people complained to the presidential office about the possibility of exchanges shut down. On top of that, these young people threatened to object for the ruling party candidate in the next local elections. Moving forward, the next challenge for the South Korean government is how they will build blockchain technologies that can be applied in a useful manner.
This is highly likely to happen given the rapid pace that Korea is capable of as it has one of the highest Internet penetration rates in the world. On top of that, they also have an upcoming 5G communication technology that is going to be implemented in 2019.
Vocal young Koreans protest against government crypto crackdown
In Seoul, South Korea, the government seemingly hinted that the Ministry is preparing legislations to ban cryptocurrency trading true exchanges. As the government is continuously implementing tighter virtual currency controls, South Korean cryptocurrency traders have a good reason to worry. After the threat to the ruling party that they won’t support the candidate in the upcoming election, the president of South Korea is left in a dilemma.
When cryptocurrencies were introduced much in South Korea, most people were trading at in the US or Europe. However, change came in 2017 when Japan and South Korea officially made their debut into the cryptocurrency trading world. After Japan announced that it recognized Bitcoin as a legal tender, this resulted in hundreds of thousands of Japanese merchants accepting Bitcoin as a form of payment.
South Koreans and their love for Ethereum
Yes, Bitcoin is a major cryptocurrency, but South Koreans have a good relationship with Ethereum. In fact, over 40% of the Ethereum traffic can be accounted to Koreans. The amount of love that Koreans have to with Ethereum is shown when they are willing to pay 40% premium to the rate deal cryptocurrency. It’s not as young Koreans which are infatuated by Ethereum. In fact, they are older adults were looking into investing in the cryptocurrency. One of the reasons that people love Ethereum is that some of them saw that it was too late for them to join in Bitcoin craze. So, Ethereum was the next best thing that they could get into.
Another important reason was that the founder of Ethereum personally met with a lot of Korean cryptocurrency enthusiasts which put a face to the cryptocurrency. Therefore, this inspires the confidence of Koreans with the cryptocurrency space. In fact, a lot of Koreans were lucky to make a lot of money when Ethereum rised in popularity. It was also largely influenced by mass media that help step Ethereum’s rise in value.
Why is Korea suddenly so interested in cryptocurrencies?
Although there is no easy answer for this, there are several possible scenarios that have made the cryptocurrency fever take over the country. Some of the people trading the cryptocurrency market largely come from wealthy Korean business owners that are trading using their parent’s money. Also, upper-class Koreans upper-class are discovering the potential profits of investing in the market. On top of that, the investment options within Korea have decreased over the past few years. In fact, the real estate market has been a safe option for Koreans to invest in but it has been increasing that it becomes unaffordable for the average Korean.
Therefore, when Bitcoin came around, it was seen as the opportunity for Koreans to take advantage of its high volatility. Therefore, high-risk traders started flooding the market and pouring the money into the Korean Bitcoin market. Once people started seeing this happening, everyone else follows.
Where is Korea headed?
As of now, it doesn’t seem like the infatuation for cryptocurrencies is going to cool down anytime soon. However, the amount of premiums on cryptocurrencies in South Korea exchanges have decreased in the past few months. Korean still take up a huge portion of the cryptocurrency trading market and the love for Ethereum is still strong among Koreans. In the future, it may be possible for Korea to see blockchain applications in their daily lives as the government is funding this more blockchain start-ups. As more people know about the potential of the blockchain, it will undoubtedly increase the number of investors in the cryptocurrency market.