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Crypto-related stocks plunge amid liquidity crisis

June 21, 2022 - 15:02 By Jung Min-kyung
Electronic boards at Bithumb Korea customer center in southern Seoul show cryptocurrency prices on Monday. (Yonhap)
South Korea’s cryptocurrency-related stocks have been nosediving in recent weeks, weighed down by the growing liquidity crisis in the global virtual currency market, data showed Tuesday.

According to the nation’s sole bourse operator Korea Exchange, Vidente, the largest shareholder of Bithumb Holdings and the company behind one of top crypto exchanges here, nearly halved from the beginning of the year to close at 8,910 won ($6.89) on the secondary bourse Kosdaq on Tuesday. It traded 3.13 percent up from the previous session and yet nearly halved in value compared with its price of 24,000 won on Jan. 3.

Vidente, a local digital broadcasting equipment manufacturer, holds a 34.22 percent stake in Bithumb Holdings, the holding company of Bithumb Korea, which operates the Bithumb crypto exchange, according to a regulatory filing.

Woori Technology Investment, a venture capital investment firm and a 7.4 percent stakeholder in Dunamu, the operator of popular crypto exchange Upbit, closed 4.06 percent lower from the previous trading at 5,670 won on the Kosdaq. It has fallen some 38 percent from the closing price at Jan. 3 of 9,290 won.

Fellow Dunamu stakeholder Hanwha Investment & Securities, which holds a 6.14 percent stake in the crypto exchange operator, closed 4.5 percent higher from the previous session on the benchmark Kospi at 3,370 won, but had shed nearly 50 percent from 6,710 won from the beginning of the year.

The global crypto market has been seeing a growing liquidity crisis. Bitcoin, the world’s largest cryptocurrency, fell to a low of $17,601.58 over the weekend, breaching the psychological $20,000 barrier for the first time since December 2020. It has so far lost nearly 60 percent of its value this year and 37 percent this month alone.

The latest crypto market meltdown has coincided with a slide in the global equity market, hit by concerns over aggressive rate hikes by the US Federal Reserve and the growing possibility of an economic recession. It also follows the crash of stablecoin terraUSD and its sister luna last month when terraUSD, meant to maintain a $1 value, fell to some 11 cents. South Korean prosecutors are investigating the terraUSD and luna fiasco, which authorities said have caused more than 280,000 local investors to lose almost $38 billion won in the first week of the price fall alone.

“With global investors’ preference for high-risk products dwindling, the crypto market has plummeted, leading to a fall in the value of crypto-related stocks,” Han Ji-young, an analyst at Kiwoom Securities said, warning of change in the market.