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South Korean millennials are reeling from the Bitcoin bust

Illustration by Alex Castro

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For months, Seoul resident Ye-won Oh monitored cryptocurrency markets voraciously, refreshing her phone practically every minute of every day. In early 2017, she invested $40,000 in Ethereum, which has become wildly popular in South Korea. Like many young Koreans living through Korea’s difficult economy, she came to see her investment as “the only way out.”

The 20-something has an impressive resume: a senior role at a flourishing startup, a college degree from overseas, and work experience at some of Korea’s most enviable firms. But she and her husband can’t afford housing in a city where the average deposit for an apartment rental is more than $400,000. “People like us, people just starting our careers and college students, it’s really hard for us because there’s no way to build up a stable life,” Oh says.

For young Koreans, cryptocurrency seems like a rare shot at prosperity. Months after last year’s bubble started to implode in February, the Korean won remains the third most traded currency for Bitcoin. The country of 52 million comprises 17 percent of all Ethereum trading, and it was the location of two-thirds of world’s biggest exchanges this winter, Korea Expose reported in February.

Three in 10 salaried workers in Korea had invested in e-currencies 

An estimated three in 10 salaried workers in Korea had invested in e-currencies by December 2017, according to a survey by Korean recruiting firm Saramin. Eighty percent of those people were in their 20s and 30s.

But now that the prices of cryptocurrency coins like Bitcoin, Ethereum, and Ripple have tanked, many Korean youths are dealing with the mental and financial aftermath of their losses. Korean psychologists have reported an uptick of patients from the so-called “Bitcoin blues,” divorce counselors say marriages are splitting from failed investments, and even the country’s prime minister said that virtual currencies are on track to cause “serious distortion or pathological social phenomena” among Korea’s young population. “As soon as I break even, I’m out,” Oh says. “It’s just not healthy mentally.”

From the outside, the Korean economy appears to be flourishing: the country is home to major industry leaders such as Samsung, Hyundai, and Kia. It’s the 11th-largest economy in the world, with semiconductors, car LCDs, and other high-tech products dominating its exports. The overall unemployment rate is just 4.6 percent.

Still, young people can’t find jobs. Youth unemployment has hovered around 10 percent in Korea for the past five years. The underemployment rate — defined by those involuntarily working jobs they’re overqualified for or are part-time — is even higher as of this year: it hovered at 38 percent in 2016, according to Dongseo University professor Justin Fendos.

In this highly educated economy, it can be hard for young Koreans to distinguish themselves from their peers. Nearly 70 percent of all Koreans ages 25–34 have a post-secondary degree, the highest of all Organisation for Economic Co-operation and Development (OECD) countries, and a high school degree is nearly universal. Entire neighborhoods in Seoul are full of college graduates studying to pass hiring exams in order to get in at Korea’s biggest companies or the enviable public sector.

“The design of Korean society is a big reason why the cryptocurrency became so popular,” says Yohan Yun, a 25-year-old assistant reporter in Seoul who invested around $400 in Ethereum. “People here are generally unhappy with their current status in society.”

“The design of Korean society is a big reason why the cryptocurrency became so popular.” 

Even employed young people are pessimistic about their economic prospects: a survey conducted in 2015 showed that half of young Koreans don’t believe that they will do better than their parents’ generation, compared to 29 percent in 2006.

“I can work for the next 30 years. I can pay off debt for a two-bedroom house that I don’t really like that much and a car. And that’s the end of my life,” says Fendos, who directs undergraduate studies at Dongseo University and also directs a program at Fudan University in Shanghai. Even if a young Korean does have disposable funds, investment opportunities are scarce, he adds. Real estate used to be the traditional way to grow one’s fortune in Korea, but prices have become exceedingly expensive for even upper-middle-class people. And interest rates for savings accounts are rarely more than a few percentage points a year. “So, they’re looking at this and they’re asking, what can I do to escape this?” Fendos says.

Jason Cho, an adviser at Bitcoin Center Korea, says young people are “in a system where the door is constantly being shut on them, and the benefits of this society are going to the very few at the top.” Cryptocurrency, for some, is a way out.  

Mass interest in cryptocurrency within South Korea began in earnest in fall 2017, according to trade volume data from Korean cryptocurrency exchange firm Korbit. Oh invested in early 2017, timing that likely allowed her to profit more than the average Korean trader.

Yun began trading in summer 2017 when the market really started heating up. “You hear all these people gaining so much extra income from it,” Yun says. “You have your friends who had nothing, [and] suddenly they’re buying cars. And you start to feel some jealousy.”

Koreans’ hyperconnectivity helped spur Bitcoin’s popularity. Teens and young adults spend around four hours a day using mobile phones in Korea. Nearly every Korean home has internet access, and 88 percent have smartphones, the highest percentage globally. Such an abundance of connectivity allowed potential traders of all ages to learn about the craze and hear about the insane amounts of money one could make on trading. Cryptotrading clubs, where people can meet like-minded traders and share tips, popped up at many Korean universities.

Thanks in part to the frenzy, some coins cost up to 51 percent more in Korean markets than anywhere else. Bitcoin’s price was up nearly $8,000 in January, Bloomberg reported. The “kimchi premium” drew foreign traders to buy their coins abroad and trade them in the Korean market.

Some coins cost up to 51 percent more in Korean markets than anywhere else

But then came the crash. From January 6th to January 16th, 2018 the price of Bitcoin to Korean won tumbled from a high of a US-equivalent $25,065 to $13,503, according to Korbit. It continued to fall to $7,410 by February 5th, and as of April 2nd, the price of a bitcoin sits at $7,241.

In total, the Bitcoin crash wiped out $44 billion of value in January, or more than Ford’s entire market capitalization, according to Bloomberg. New regulations against cryptocurrency trading, particularly ones from a worried South Korean government, helped usher the fall.

Twenty-two-year-old Sijin Lee didn’t start trading until November. He is a third-year student at Kyung Hee University, a prestigious college in Seoul. Lee’s investment multiplied five-fold over the winter months, but now, he’s lost half of his principal. He estimates 70 percent of his friends who traded crypto lost money.

The extreme fluctuations wreaked emotional havoc on many traders, many of whom had invested much their entire life savings. When Bitcoin fell by 10 percent in January, traders shared photos of computers, sinks, bathtubs, and doors they furiously destroyed. “Why is my life always like this?” wrote one trader with a photo of his rage-induced vomit. “I don’t even feel like cleaning.” One Bitcoin community included the temperature of Seoul’s Han River, should low prices coax any traders to “take a swim” (aka jump off a bridge to kill themselves).

South Korean media has linked multiple suicides to the cryptocurrency crash. One university student in his early 20s who had invested $18,500 in cryptocurrency was reported dead by suicide on February 1st. Later that month, the mother of a 30-year-old IT worker found her own son who committed suicide. Friends told local media that he had lost nearly $10,000 in cryptocurrency.

“It was too bad, but it didn’t stop me.” 

Oh says she’s still in the positive, but she can relate to the frenzy. She and her husband lost $20,000 to a massive $250 million mining scam. “It was too bad, but it didn’t stop me,” Oh says. “It didn’t really impact me in terms of my trust in the strength of Ethereum as a currency.”

That resolve worries many top government officials, who slapped on a slew of regulations earlier this year to keep cryptocurrencies in check. As Korea’s prime minister said in November, “Young people and students are rushing into virtual currency trading to earn huge profits in just a short period of time. It is time for the government to take action as it could lead to serious pathological phenomena if left unchecked.”

Lee, the university student who lost half of his own Bitcoin investments, says he’s still looking to become a gym teacher, a goal he maintained during the craze. “Money is not the only thing in life,” he says.

Oh and her husband are now looking for more stable investments so that they can someday buy a home. “I don’t think a lot of people were thinking they would have some luxurious life, going around in a yacht and traveling the world,” Oh says. “People just wanted to buy a house. That’s why they were going so crazy.”

Correction: The article previously stated that the underemployment rate in South Korea stood at 38 percent as of this year. This figure actually dates back to 2016.