Capital Movement from Cryptocurrency to Stock Market - Analysis of the Response of Capital Markets to the Launch of the Lee Jae-myung Government

Introduction | The Policy Signals Indicated by Asset Flows

The recent Korean asset market is reaching an important turning point. While capital is flooding into the stock market, the virtual asset (coin) market is experiencing a rapid decline in trading volume and investor sentiment. This can be seen as an empirical case showing how deeply policy and politics influence market sentiment beyond simple market gains and losses. In particular, the significant influx of funds into the stock market after the launch of the Lee Jae-myung administration is interpreted as a signal reflecting the new government's policy direction and the market's expectations regarding it. Asset flows may be silent, but they sometimes serve as the most honest indicators of policy evaluation.

Main Point 1 | Why is money flooding into the stock market now?

As of June 2025, the domestic stock market is regaining vitality after a long time. The daily average trading volume of the KOSPI and KOSDAQ markets exceeds 20 trillion won, reaching a yearly high of 25 trillion 330 billion won on June 17. The inflow of funds from individual investors is also significant. As of June 18, customer deposits amount to 65 trillion 200 billion won, reflecting an approximately 15% increase from about 56 trillion 530 billion won at the beginning of May, just a month earlier. The backdrop for this trend is the market-friendly policy stance of the Lee Jae-myung administration. The new government has prioritized economic stimulation and is presenting policies that emphasize economic revitalization over tax increases at a swift pace. Policies directly related to the capital market, such as financial market regulation easing, technology stock support, and the expansion of the entrepreneurial ecosystem, have been announced consecutively, drawing investors' attention to so-called "policy beneficiaries." When the policy direction is clear and consistent, the capital market responds rapidly. The current inflow of funds into the stock market indicates that this expectation is being translated into trust in the market.

Main Part 2 | The Contraction of the Coin Market, the Aspect of Weak Assets in Uncertainty

At the same time, the virtual asset market is showing a contrary trend. The trading volume of major domestic virtual asset exchanges, which exceeded 5 trillion won on average per day in May, has sharply declined to around 3.3 trillion won in June. This represents a decrease of over 30%. Bitcoin continues to maintain a sideways trend, while major altcoins like Ethereum and Solana have also seen their market capitalizations reduced by hundreds of billion dollars. This trend is attributed to a combination of risk factors. On a global level, the potential prolongation of tight monetary policy following the Federal Reserve's interest rate freeze is putting pressure on the market, and geopolitical instability in the Middle East is further encouraging a preference for safe assets. Domestically, the lack of a clear institutional framework and investor protection measures for virtual assets still exists, and the uncertainty of policies is acting as a decisive constraint on the virtual asset market. This situation reaffirms the fact that virtual assets can quickly contract without established institutional trust and a predictable environment, highlighting the significant policy sensitivity inherent to the nature of these assets.

Main Point 3 | The Policy Implications of Shifts in Asset Allocation

Capital essentially pursues profit while also valuing stability. The trends observed in asset markets provide important signals about how capital moves in response to policy trust and economic outlook, transcending short-term market volatility. The current influx of funds into the stock market and the contraction of the virtual asset market are not merely issues of returns but represent the capital's response to institutional foundations and policy signals. The stock market is a direct beneficiary of government policies and is institutionally stable, whereas virtual assets are still showing sensitivity to external shocks amidst regulatory gaps. The market-friendly policy direction and liquidity expansion emphasized by the Yoon Suk-yeol administration from the outset have acted as positive signals for capital market participants. To ensure that this trend does not result in a mere short-term effect, consistency and feasibility in policies must follow. If medium- to long-term policies such as strengthening ESG, expanding investments in the semiconductor and AI industries, and enhancing capital market transparency are implemented concurrently, the trust of global investors will be further solidified.

Conclusion | Capital has no voice, but it indicates the direction.

Capital may be silent, but its flow carries a clear message. The current bullish trend in the stock market and the contraction in the virtual asset market are not merely changes in investment trends they represent the market's assessment of the policy direction of the Lee Jae-myung government. Notably, despite being in the early stages of policy implementation, the asset market is already showing a certain level of trust and expectation. What is crucial now is the sustainability and predictability of policies that can solidify this trust. If a balance between regulation and growth, transparent and consistent communication, and effective execution are maintained, capital will respond more actively to that direction. The asset flows currently emerging are not just a mere listing of numbers they are living evidence of how policies can alter the landscape of assets. The market always observes policies, and assets respond in the language of that observation.