Most cryptocurrencies dropped sharply in value on South Korean exchanges Tuesday after President Yoon Suk Yeol declared martial law amid a political crisis in the Asian nation.

Bitcoin briefly fell 33% to $61,200 on South Korea’s Upbit exchange, while the cryptocurrency traded around $95,000 on Coinbase, Binance, and other exchanges.

Ethereum also declined by double digits and traded at a 7% discount to the rest of the world while the political crisis unraveled. And XRP, the darling of a recent rally, shed more than half its value.

Juicy opportunity

The development immediately created a juicy arbitrage opportunity for traders.

Unlike years past, when savvy investors could purchase Bitcoin for cheaper on exchanges in Hong Kong and the West to later sell with “kimchi premiums” in South Korea, traders enjoyed the opposite scenario today.

But it didn’t last long.

By late afternoon trading UK time, Bitcoin had jumped back on South Korean exchanges and erased the sizable gap, now showing a 2.5% discount. Ethereum, too, dropped the discount to 2.5%, as did XRP, which was trading at a 3% rebate to the rest of the world.

It appears that Yoon’s martial law regime didn’t last long either.

On Tuesday night local time, Woo Son-shik, speaker of the National Assembly, said the declaration had been rendered “null and void” following passage of a resolution, according to The New York Times.

Yeol had accused the country’s opposition party of sympathising with North Korea and paralysing the government with “anti-state” activities.

The won fell 1% to the US dollar in trading Tuesday, the lowest it’s been in two years.

Kimchi premium

Unique dynamics in the Korean cryptocurrency market have long driven the kimchi premium.

South Korea has strict capital controls, strong local demand for crypto, and a relatively insular financial system.

In recent months, the premium has flashed negative, driving investors to maintain a bearish outlook on crypto in the country for some time.

Analysts chalk up sentiment to “sluggish” local sentiment, optimism that Donald Trump’s victory in the election will drive more trading to non-Korean platforms, and a lacklustre altcoin market, according to The Korea Times.

Both the main South Korean political parties agreed over the weekend to delay a new tax regime in the country.

The two-year postponement means a 20% tax for capital gains earned on crypto trading will not go into effect until 2027.

Pedro Solimano is a markets correspondent based in Buenos Aires. Got a tip? Email him at psolimano@dlnews.com.