The Bank of Korea lifted its benchmark interest rate for the first time in over three years, amplifying concerns for cryptocurrency markets already under pressure from a $1.45 billion leveraged equities wipeout. The central bank raised the policy rate by 25 basis points to 2.75% on July 16, with all seven monetary board members backing the decision. The move, which marks the first increase since January 2023, signals tighter financial conditions in a country that remains one of the world’s most active retail crypto hubs.
South Korea’s retail traders — especially those in their 20s and 30s — are feeling the squeeze from multiple sides. According to market estimates, over 1.2 million leverage accounts hit margin-call thresholds by mid-July, leading to forced liquidations that erased roughly 2.15 trillion won ($1.45 billion). Young investors accounted for 62% of fully liquidated accounts, underlining how heavily this demographic had borrowed during the country’s earlier equity rally. The deleveraging was already building: June saw record forced sales of 1.12 trillion won, up from 707.6 billion won in May, as sharp KOSPI swings repeatedly caught leveraged positions offside.
The rate hike is expected to compound the retreat from speculative assets. Governor Hyun Song Shin said growth, inflation — which hit 3.2% in June — and financial stability risks all supported the move. The central bank left the door open for further tightening, with many economists forecasting at least one more hike that could lift the rate to 3.00%. Higher borrowing costs and yields on safer assets may further cool crypto demand, which had already been shrinking: won-based cryptocurrency trading volume fell 71% between August 2025 and May 2026, while exchange-held won deposits declined to 7.8 trillion won from 10.7 trillion won.
The impact is particularly acute for altcoins that rely heavily on Korean liquidity. XRP, which briefly became the most traded asset on Upbit in May with $110.9 million in daily volume, remains emblematic of how Korean retail activity can swing global markets. Though exchanges like Upbit and Bithumb continue to list new tokens — Derive’s DRV being a recent addition — the overall climate of tighter policy and equity-driven losses risks keeping a lid on crypto risk appetite.
