South Korea appears to be on the verge of an economic crisis, with its won falling to a 15-year low against the dollar. As the won falls to 1,448.9 against the dollar, major investors are turning to the USDT stablecoin due to fears of financial crisis. CryptoQuant CEO Ki Young Ju raises concerns by comparing the situation to the IMF crisis in 1998.
KRW’s Depreciation and Transition to USDT
The South Korean won creates uneasiness in the markets with its depreciation against the dollar. USDT trades at a 3% premium over the official exchange rate and is unofficially valued at KRW 1,559 on Upbit. Ki Young Ju states that this premium reflects exchange rates during the 1998 IMF crisis. He states that large investors accumulate USDT in an environment of uncertainty.
The fact that investors are turning to USDT shows that confidence in the local currency is decreasing. The acceleration of capital outflows increases the fragility of the economy. Ki Young Ju argues that the government’s strict measures to maintain the exchange rate have worsened the situation. He thinks supporting industries and reducing regulations could be more effective in attracting investment and stabilizing the economy.
The Importance of Economic Reforms and Future Expectations
South Korean Finance Minister states that they will make bold interventions to stabilize financial markets. It is planned to expand foreign exchange clearing lines and allow local banks to manage foreign exchange transactions flexibly. However, these steps do not fully alleviate market tensions. The country’s stock market index, KOSPI, reacts with a decline of approximately 2%.
The central bank predicts that the country’s growth potential is currently around 2% and could fall below 1% by the 2040s. Low innovation and resource inefficiency are among the main reasons for the decline in growth. The bank emphasizes that structural reforms are vital to reverse this trend.
International macroeconomic factors also put pressure on the won. Especially the US Federal Reserve’s cautious stance on interest rate cuts causes KRW to lose value. After the US Fed announced a 25 basis point interest rate cut on December 18, KRW fell to its lowest level. Jerome Powell’s speech negatively affects market sentiment by indicating that the US central bank will take a hawkish approach.
South Korea’s economic future is shaped by investor movements and the measures taken by the government. The fact that investors are turning to alternatives such as USDT and the weakening of the local economy is considered an indicator of the difficulties facing the country. Innovative policies and structural reforms are of great importance to ensure economic stability. Comprehensive strategies need to be developed to stop capital outflows and strengthen the local economy.
Disclaimer: The information contained in this article does not constitute investment advice. Investors should be aware that cryptocurrencies carry high volatility and therefore risk, and should carry out their transactions in line with their own research.
