The KOSPI index experienced violent swings as prospects for artificial intelligence infrastructure investment deteriorated, with heavyweight stocks like Samsung Electronics and SK Hynix leading the decline. Although Bitcoin showed apparent resilience and rebounded above $83,000, a wave of liquidations worth $800 million in the derivatives market revealed deep-seated fragility.
On Tuesday, the South Korean market suffered a severe sell-off, with the KOSPI index plunging as much as 7.4% intraday before closing at 6,035.35 points, a drop of 6%, briefly breaking below the psychological 6,000-point mark during the session. The core driver of this turmoil came from continuous bleeding in the semiconductor sector: Samsung Electronics shares fell 7.39%, while SK Hynix dropped even more sharply at 10.09%. Both giants have now declined for five consecutive trading days. Given that these two memory chipmakers together account for roughly half of the KOSPI's market capitalization, their movements directly determine the fate of the broader index.
Data compiled by Woofun AI shows that foreign investors sold approximately 4.5 trillion Korean won (about $3.35 billion) worth of Korean stocks on Tuesday, intensifying downward pressure on the technology sector. Investment research firm Paradis Labs noted that this selling reflects a strategic shift by foreign institutions to "sell Korean stocks, buy US stocks," while domestic investors have been relatively patient, with some funds rotating from memory chips into financial stocks.
Catalysts for the worsening situation include comments from Broadcom (AVGO.US) CEO Hock Tan, who compared speculative AI investment to gambling, sparking concerns about returns on massive capital expenditures. Paradis Labs warned that amid escalating tensions with Iran, South Korea's reliance on imported crude oil poses an additional risk, as rising energy prices could stoke inflation and undermine stock market confidence. BlackRock (BLK.US) also downgraded US equities from "overweight" to "neutral" due to concerns about AI sector volatility and rising borrowing costs, while increasing allocations to short-term Treasury bonds.
The semiconductor weakness quickly spread globally. On Monday, the Philadelphia Semiconductor Index fell 2.7%, and on Tuesday, the Nikkei 225 index also declined 1.8%.
Meanwhile, although the cryptocurrency market has rebounded, leveraged liquidation data remains alarming. Over the past 24 hours, total cryptocurrency liquidations reached $812.9 million, involving 170,209 traders. Of this, long position liquidations amounted to $686.72 million, accounting for 84.5% of the total, while short position liquidations totaled $126.19 million. Bitcoin suffered the largest losses at $192.14 million, with long positions accounting for nearly 74% of its total liquidations. Ethereum liquidations reached $180.5 million, and Solana liquidations totaled $60.85 million. The single largest liquidation occurred on the Binance platform, where a Bitcoin long position worth $9.65 million was forcibly closed.
Forced closures of long positions exacerbated selling pressure and pushed prices lower, while the subsequent rebound caught short sellers off guard, with short covering further driving prices up. However, this rebound lacks solid demand support and is more the result of passive buying and short position closures. CryptoQuant analyst JA Maartunn noted that Bitcoin's net buying volume has turned negative again, indicating that selling pressure in the derivatives market still exceeds buying pressure. This means that even as prices recover, selling pressure persists. The release of US inflation data on Wednesday will be a key variable. If the stock market decline accelerates or leveraged traders rebuild positions, Bitcoin's current rebound momentum will face a severe test.
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