Fundstrat Co-Founder Tom Lee: Decline in Korean Stocks May Temporarily Impact Crypto
Fundstrat co-founder and BitMine chairman Tom Lee stated that the significant decline in the South Korean stock market is likely spilling over into the cryptocurrency market, with channels including broker margin liquidations. South Korean investors are a major holding group for crypto assets, currently causing short-term pain for ETH.
The KOSPI index in South Korea dropped sharply on October 13, with a decline of about 4% within the first hour of trading, triggering the sidecar mechanism, which paused programmatic sell orders for 5 minutes. This mechanism activates when KOSPI 200 futures fall more than 5% and remain there for one minute, marking the first occurrence in nearly two months. At one point, the index fell over 6% to 7%, dropping below 6000 points, with Samsung Electronics and SK Hynix leading the decline, both down approximately 7% to over 8%.
The backdrop for the decline includes news that Chinese memory chip manufacturer ChangXin Memory Technologies (CXMT) has made progress in DRAM technology and plans to launch next-generation server products within the year, compounded by weakness in U.S. tech stocks. South Korean retail investors have long participated in the stock market with high leverage, particularly chasing AI semiconductor trends through leveraged ETFs, with previous margin debts reaching record levels.
Tom Lee pointed out that forced liquidations are occurring on the brokerage side. South Korean investors hold a large amount of crypto assets, and when their stock accounts face margin calls, they may sell crypto assets across markets to replenish liquidity or prevent forced liquidation, putting pressure on ETH as one of the more liquid major assets.
In the past 24 hours, approximately $774 million in crypto market leverage was liquidated, with about 89% of the liquidations being long positions, and ETH liquidations totaling around $169 million. BTC briefly fell below $82,000. Lee described this as short-term liquidity pain caused by forced liquidations, expecting that selling pressure will naturally diminish after the liquidation wave in Korea ends.
Funds are flowing from high-leverage stock accounts in Korea to cash or cross-market asset sales, showing clear event-driven characteristics. Beneficiaries are institutions and long-term holders waiting to reallocate after the liquidation ends, while pressured parties are high-leverage South Korean retail investors and ETH bulls. BitMine, as an Ethereum treasury company, holds a large amount of ETH, and Lee's comments are related to its position.
A relatively high proportion of the population in Korea holds crypto accounts, with historical local demand characteristics such as the "kimchi premium."
ABAB AI Insight
Tom Lee is the co-founder of Fundstrat and has long expressed macro and crypto views on platforms like CNBC, also serving as chairman of BitMine. BitMine is positioned as an Ethereum treasury company, having accumulated millions of ETH and continuing to increase its holdings, aiming for nearly 5% of total supply. Lee has previously viewed corrections in the Korean stock market as buying opportunities, emphasizing that the long-term story for AI semiconductors remains unchanged and predicting the continuation of a crypto bull market.
In terms of capital flow, South Korean retail investors have concentrated their high leverage in AI-related stocks like Samsung and SK Hynix through leveraged ETFs and margin debts, with previous debt levels reaching around 30 trillion won. When the stock market declines trigger forced liquidations, the crypto assets held by the same group of investors become a quickly liquidatable source of liquidity. BitMine itself holds a large amount of ETH and emphasizes low debt, and Lee's description of "short-term pain" aligns with its treasury strategy, aiming to differentiate liquidity shocks from fundamentals.
Similar to the crypto markets in 2018 and 2022, regional retail leverage and traditional market volatility have been transmitted through margin channels. Historically, Korea has seen high volatility and the amplifying effects of leveraged products, currently in a deleveraging phase following an AI-driven rise, rather than at the end of a cycle. Lee has previously likened similar corrections to Cisco's multiple halving during the internet bubble, which still saw significant increases.
Essentially, this is about capital concentration and liquidity transmission. High-leverage retail investors simultaneously allocating to stocks and crypto make single market margin liquidations amplify through cross-asset selling. The mechanism is that forced liquidations primarily target liquid assets, with ETH becoming a major pressure point due to its trading depth and concentrated holdings, while the long-term narratives of AI and tokenization continue to be supported by institutional treasury and technological replacement paths.
ABAB News · Cognitive Laws
- Leverage connects markets, liquidations cross assets
- Short-term pain stems from liquidity, long-term narrative stems from structure
- The same batch of funds can both drive prices up and down, releasing simultaneously during deleveraging.