South Korea's KOSPI crashed 33% through July, then clawed back 18% in a single day on July 31. The recovery was real. The problem is traders in crypto markets, which often move alongside Korean stocks through overlapping players, remain devastated by the earlier collapse.
The July plunge obliterated the index's previous worst month on record, worse than drops seen during the 1997 Asian Financial Crisis or 2008 global meltdown. Samsung Electronics and SK Hynix, which had anchored an AI-fueled rally, got hit hardest. When China announced mass production of homegrown chipmaking tools on July 28, the KOSPI fell 10.8% that day alone. Trading halted multiple times.
SK Hynix's earnings miss the next day, combined with the chip news, sent measured losses from June's peak toward 44%. Younger retail investors who had loaded up on leveraged bets in Samsung and SK Hynix ETFs got wiped out. Steve Kim, chief executive of Four Pillars blockchain research firm in Seoul, explained the root cause to Bitcoin.com News. Outstanding leveraged positions on Korean equities hit a record 29.2 trillion won, roughly $19.7 billion, concentrated in single-stock ETFs tied to those two chips. "Many younger investors expected the rally to continue," Kim said. "There is definitely a generational divide. Younger investors have been hit much harder."
The July 31 rebound was powered by Leopold Aschenbrenner's AI fund sale to Citadel and Microsoft beating earnings expectations. Yet KOSPI still trades roughly 22% below its June close. Kim notes that crypto and Korean stocks normally move independently, but they share traders. "Many of Korea's most active crypto traders are also the same people who aggressively traded equities." That overlap means stock market losses cascade directly into digital asset portfolios, leaving the same people broke on both sides.
This article is for informational purposes and should not be construed as financial advice or investment guidance.
