Weekly Institutional Insights: Equity and Crypto Retreat in Last Few Days’ Trading; Kimchi Premium Surges

Dec 30, 2024: Our weekly Institutional Insights explores the latest market developments — market performance, industry news, exchange-traded fund (ETF) flows, trending topics, upcoming events and token unlocks — to help you supercharge your crypto trading.

Enjoy our weekly take on the market!

Weekly Highlight — Last Few Trading Sections of 2024 See Retrace?

Source: Bloomberg

Despite the optimism surrounding Trump's trade policies and the excitement over AI, 2024 has been a challenging year for investors across various markets. Persistent inflation and the volatility of the Federal Reserve's actions have contributed to a general sense of unease. Notably, the largest exchange-traded fund for long-dated Treasuries experienced significant fluctuations before ending the year in negative territory. Commodities, influenced by fluctuating expectations of Chinese stimulus, have also faced ups and downs. Even safe investments saw declines, as rising yields affected BlackRock’s $30 billion investment-grade ETF, resulting in its worst fourth quarter in eight years.

Equities provided a glimmer of hope, with U.S. companies leading the charge. However, this rally wasn’t uniform, as the S&P 500 fell by 1.7% on a typically quiet year-end day. This drop highlighted struggles for value and small-cap stocks, as the S&P 500's impressive 25% return masked weaker performances among its average constituents.

Momentum investing, a strategy that capitalizes on market trends, saw remarkable success, but concerns were raised about its sustainability. While it gained 31% in 2024, marking its best year since 2002, recent downturns have made investors wary of potential volatility. Analysts note that, while technology stocks have thrived, the increasing dominance of passive funds could render the market more susceptible to sudden shifts.

Weekly Crypto Highlight — Bitcoin’s Price Whipsawed Following Hawkish Fed Remarks

Kimchi premium. Source: CryptoQuant

The kimchi premium, a significant indicator of Bitcoin's popularity among South Korean investors, has surged to a four-month high amid the East Asian nation’s escalating political turmoil. Currently, the gap between Bitcoin’s prices on Coinbase and the South Korean exchange Upbit ranges from 3–5%. A rising kimchi premium typically signals increased demand for Bitcoin among South Korean investors, with a similar trend observed for the stablecoin Tether (USDT).

According to Ki Young Ju, co-founder and CEO of CryptoQuant, South Korea is experiencing an unprecedented outflow of wealth driven by political instability, declining birth rates and sluggish economic growth. Inflation fears are prompting residents to convert their won into U.S. stocks, Bitcoin, gold and dollars, with many preferring cryptocurrency exchanges over traditional banks, resulting in premiums for Tether and Bitcoin.

The political crisis intensified after President Yoon Suk Yeol's brief and rescinded declaration of martial law, followed by his impeachment on Dec 14, 2024. Prime Minister Han Duck-soo was appointed acting president, but was also impeached, marking a historic first. Compounded by economic challenges and threats from North Korea, the turmoil has unsettled financial markets, leading to a 0.35% decline in the South Korean won against the U.S. dollar.

South Korea is known for its vibrant retail cryptocurrency market, with trading volumes on local exchanges often surpassing those on stock exchanges. Since corporate accounts are prohibited, the crypto market in South Korea is predominantly driven by retail investors. The kimchi premium serves as a key metric for gauging retail interest in cryptocurrencies, influenced by strict currency controls and anti-money laundering regulations.

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