- South Korea’s stock market dropped over 20% in recent weeks, its lowest point in 15 weeks.
- The sell-off was mostly driven by a crash in semiconductor and AI stocks.
- Bitcoin reacted negatively to yesterday’s sell-off, falling below $63,000 at one point.
South Korea’s stock market took a massive hit in the last few days, with the KOSPI index dropping more than 10% in just one session yesterday, and an additional 6% today. It closed at 5,663.24, reaching the lowest point in 15 weeks, with more than20% in cumulative losses over recent weeks.
The sell-off was mostly driven by a crash in semiconductor and AI stocks, including Samsung Electronics (dropped14.4% yesterday, the biggest loss since late October 2008, with a further 5% drop today) and SK Hynix (down 14.7% yesterday, nearly 10% today). Additionally, concerns about AI infrastructure spending and rising competition from China’s chip industry likely spooked investors as well.
For instance, reports of Chinese companies improving their own DUV (Deep Ultraviolet) lithography equipment, along with a strong IPO from memory chip maker CXMT, raised fears that Chinese firms could soon become strong competitors in an area where Samsung and SK Hynix have long been the dominant players.
So far this month, the KOSPI has fallen about 40%, which is even steeper than the 27% dive it saw back in October 1997, its worst month on record.
Bitcoin’s Price Drop and Rebound
At the same time, Bitcoin came under pressure, dropping below $63,000 at one point, but rebounding again today at around $64,500.
While there generally isn’t a direct one-to-one cause between South Korea’s stock slide and Bitcoin’s price, there are shared factors. Namely, both reacted to the global sell-off in AI and semiconductor stocks, forcing investors to pull back from riskier assets all over the world.
When institutional investors get cautious, they tend to sell multiple risk assets simultaneously, including tech stocks and crypto.
Also, while semiconductor equities and Bitcoin might seem to have little in common, they are increasingly held by the same institutional investors. Hedge funds, macro funds, ETFs, and asset managers often put money into AI stocks, chip companies, tech ETFs, and crypto all at once.
Despite Bitcoin being named digital gold, its near-term price movements tend to move with the broader economy. The main reason why that happens these days is because a lot of Bitcoin is held by ETFs, hedge funds, corporate treasuries, and institutional investors, so it’s more sensitive to shifts in global liquidity and investor confidence than it used to be.
Related: Bank of America Warns of Tough August for Stocks: How Will Bitcoin Respond?
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