Author: Claude, Deep Tide TechFlow

Deep Tide Introduction: The Korea KOSPI index triggered the circuit breaker mechanism again on July 13, with Samsung Electronics and SK Hynix plunging more than 7% and 12% respectively, and the index has cumulatively retracted more than 20% from the peak on June 19. Retail investors are starting to vote with their feet: According to Coingecko data, the transaction volume of Korea's largest exchange Upbit surged to $4.12 billion in nearly 24 hours, with a daily increase of 436%. The top five traded cryptocurrencies are BTC, XRP, ETH, T, and BLAST.

The continuous plummet of the South Korean stock market over nearly a week is pushing retail funds toward the crypto market.

On July 13, the KOSPI index opened down 63.91 points to 7,412.03. The decline continued to widen during the day, and at 10:34 AM, the KOSPI 200 futures fell over 5%, triggering the 18th temporary trading halt (sidecar) this year. When triggered, the KOSPI reported 7,162.21, down 4.20% from the previous trading day.

On that day, Samsung Electronics fell more than 7.72%, and SK Hynix plummeted over 12%. SK Square (the largest shareholder of SK Hynix) fell 15%, and Samsung Electro-Mechanics dropped 17%.

KOSPI has retracted over 20% from its peak, semiconductor supercycle encounters trust crisis

The KOSPI has entered a technical adjustment since the intraday high of 9,385 points on June 19, with a cumulative retreat of more than 20%.

The volatility of the Korean exchange in 2026 has surpassed that during the 2008 financial crisis. So far this year, the Korean exchange has triggered nearly 30 sidecar trading halts and multiple circuit breakers, breaking the historical record of 26 sidecars throughout 2008.

Samsung Electronics and SK Hynix together account for about half of the KOSPI's market capitalization, and the two almost determine the rise and fall direction of the index. eToro market analyst Zavier Wong previously pointed out that these two stocks accounted for about a quarter of the index's weight at the end of last year, which has now risen to about half. Any significant fluctuation in either will drag the entire index before the remaining more than nine hundred listed companies have a chance to react.

SK Hynix "good news exhausted" coupled with profit expectation downgrade, dragging the entire semiconductor sector

SK Hynix just listed its ADR on Nasdaq on July 10, with a first-day trading jump of 12.8%, raising approximately $26 billion for the company. However, three days later in the Seoul market, the stock price encountered a classic correction of "buy the rumor, sell the news".

On July 13, Korean Investment Securities analyst Choi Min-sook released a report predicting that SK Hynix's operating profit for the second quarter would be 60.4 trillion won, about 8% lower than the market consensus of 65 trillion won. Her explanation is that SK Hynix's sales of HBM (high-bandwidth memory, high-speed storage technology core supporting AI chips) account for a higher proportion than competitors, leading to its average selling price growth rate being lower than the industry average.

This expectation downgrade is particularly damaging in the current environment. Daishin Securities analyst Lee Kyung-min pointed out that the KOSPI due to excessive concentration in semiconductors, leveraged investment liquidation, and supply-demand shocks, the forward P/E ratio has dropped to levels seen during the 2008 global financial crisis. However, he also mentioned that the current valuation has entered the undervalued range, and even a slight positive catalyst could trigger a rapid rebound.

However, there are cautious voices in the market about this. The KOSPI's "Buffett indicator" (market capitalization to GDP ratio) reached 221% in June, far exceeding the average level of 70.2% from 2000 to 2025, suggesting that there is still room for valuation adjustment.

Upbit transaction volume surges 436%, funds flowing back from the stock market to the crypto market

According to Coingecko data, Upbit's transaction volume reached $4.12 billion in nearly 24 hours, with an increase of 436%. The top five cryptocurrencies by trading volume are Bitcoin, XRP, ETH, T (Threshold Network), and BLAST.

Korean retail investors moving from the stock market to the crypto market is not a new phenomenon. This round of inflow is highly consistent with the script during previous rounds of KOSPI plunges. During the previous decline in May, XRP already became the highest trading volume crypto asset on Upbit and Bithumb, with a daily trading volume exceeding that of Bitcoin and Ethereum.

Tiger Research analyst Ryan Yoon attributes this phenomenon to Korean retail investors aged 40 to 50, who are withdrawing funds from domestic and U.S. stocks and entering the crypto market, with XRP being the preferred target.

Prior to this surge in trading volume, the Korean crypto market had actually experienced five consecutive weeks of reduced trading. From July 3 to 10, the total trading volume of Korea's five major won trading platforms (Upbit, Bithumb, Coinone, Korbit, Gopax) was 9.9676 trillion won, a decrease of 25.75% from the previous week, falling below 10 trillion won for the first time since September 2023.

The trading volume explosion on July 13 can be seen as a concentrated release after this period of reduced trading. In terms of trading varieties, Threshold (T) and BLAST appeared in the top five, reflecting the speculative inclination of Korean retail investors towards small and mid-cap altcoins. According to Bitcoin Sistemi data, T achieved a 24-hour trading volume of $68.27 million on Upbit, with the total trading volume in Korean exchanges being approximately $76.75 million.

Korean stock market and crypto market seesaw effect: a continuously validated trading logic

South Korea is one of the few markets globally where retail funds switch massively between the stock market and the crypto market. So far, more than 16.2 million people in South Korea have crypto accounts, accounting for about 32% of the total population, and the number of crypto holders has surpassed that of stock investors. According to Chainalysis data, South Korea has received over $722 billion in crypto asset value, making it the second largest crypto asset receiving country globally after the United States.

Public data shows that from July 13 to 19, the trading volume of stablecoins in South Korea's five major exchanges reached 2.226 trillion won (approximately $1.62 billion). The high trading enthusiasm of Korean investors began to show on July 11 when they frantically bought XRP.

According to previous patterns, South Korean retail investors' aggressive accumulation usually concentrates within 1 to 3 trading days after a KOSPI plunge, after which trading enthusiasm gradually declines as the stock market stabilizes. Investors need to pay attention to: if the KOSPI receives support at the current level, the "spillover effect" funds in the crypto market may also retreat quickly.