Korea Sell-Off Sparks Crypto Contagion Fears as KOSPI Slump Threatens Digital Assets

South Korea Sell-Off Raises Crypto Contagion Fears

Tom Lee warned on October 13 that South Korea's stock market sell-off could spill into crypto as falling equities trigger brokerage margin liquidations and pressure investors who hold digital assets.

Lee's Warning Comes Amid Broader Market Weakness

His warning came as the KOSPI extended its losses, Bitcoin fell to $81,000 before recovering, and leveraged crypto traders suffered hundreds of millions of dollars in liquidations.

Korea's Sell-Off Intensifies Trading Session

The sell-off intensified during Tuesday's Asian trading session, with the Korea Exchange triggering a five-minute sidecar, temporarily restricting program selling after the KOSPI fell 5%.

Market Decline Exceeds 6%

Losses in South Korean equities hit around $150 billion as the index dropped 4.5% within minutes, with Samsung and SK Hynix, which together account for about half of the index, falling 5% and 6%, respectively.

Risk of Crypto Contagion

Lee's concern is that losses in stocks can force investors to sell other assets to meet margin calls. If investors holding crypto face the same pressure, selling could spread into digital-asset markets even without a crypto-specific trigger.

Crypto Under Pressure

Crypto was already under pressure as the market experienced a downturn, with Bitcoin hitting an 18-day low around $80,000 late last week, and Ethereum experiencing a decline in value.

Impact on BitMine

Lee's comments also come as his company, BitMine, holds 6,028,946 ETH, or 4.9% of supply, after buying 12,532 ETH, its third small weekly purchase in a row.

Conclusion

Lee's warning highlights the potential risks of a sell-off in South Korea's stock market on the crypto market, and the need for investors to be cautious and monitor their positions closely.