03 Apr South Korean millennials get the bitcoin blues
South Korean consulting firm Saramin estimates 30% of salaried workers invested in cryptocurrencies by December 2017 and 80% to 90% were 20 or 30-somethings. With the cryptocurrency market the way it is today, it’s no wonder South Korean millennials have the bitcoin blues. Literally.
The Korean Won is the third-largest currency traded for bitcoin after the Japanese yen and US dollar. Several of its cryptocurrency exchanges are among the largest in the world by trading volume.
Recognizing the virtual trading mania, the government announced regulatory plans early in the new year, implemented some trading and anti-money laundering regulations and pulled back on others after a public outcry. But it was enough to heavily impact the cryptocurrency market negatively and by February 2018, the damage to investors was huge.
Given this environment, are South Korean millennials doubling down to try and recover their diminished cryptocurrency investments?
Why cryptocurrency investments?
The Saramin study says more than half of those surveyed saw cryptocurrency as ‘the fastest way to earn high profits’ (54.2%). The average investment was $5,320 (5.6 million Won with 44% investing $950 or less (1 million Won), 18.7% putting in less than $1900 (2 million Won) and 12.9% investing $9,500 (10 million Won) or less.
As with many bubble markets, reports of instant millionaires seemed to just feed the frenzy and the FOMO (fear of missing out) even after the market crash.
The Korean Biomedical Review reports the bitcoin blues are a reality for some young South Korean millennials:
“People are seeing relatively small sums of money rising 10- to 20-fold to the millions,” said Dr. Noh Gyu-shik, a well-known psychiatrist and expert in adolescent psychology. “They can’t just ignore what’s going on because the winnings are so large. It’s also difficult to not compare themselves to others. Some may feel like they missed out while resenting their peers’ success.”
South Korean economy booming but…
South Korea’s economy is booming. It’s the 11th largest economy in the world with unemployment of only 4.6%. Nearly 70% of its young people have graduated from universities, the highest level of OECD countries.
But youth unemployment is 10% and even more young people, an estimated 38%, are underemployed. In Seoul, it can cost an average of $400,000 for a deposit to rent an apartment and many young people are simply discouraged at their future prospects.
So to many young South Koreans, investing in cryptocurrency is a gamble they still seem ready to take, despite the risks.
Unique market trading features
South Korea’s cryptocurrency market has several unique features worth noting. First, and most important to traders, there is still a “kimchee” premium price paid for cryptocurrencies by South Korean investors. This still enables foreign purchases of cheaper cryptocurrency and sale at a profit back in Korea – a form of virtual arbitrage.
Cryptocurrency exchanges in South Korea still are among the highest in daily trading value and volume. The Won is still the third biggest currency traded for bitcoin globally.
South Korea is likely to stay among the top cryptocurrency trading nations, but the lessons learned by young investors may curb your enthusiasm somewhat.
The secret is for all investors to be better informed and more aware of both the risks and how to research better about cryptocurrencies, markets, and scams.