S.Korean students dive into virtual coins amid crackdown

Driven partly by high unemployment, the youth are opting to invest in ‘altcoins’

December 30, 2017 09:17 pm | Updated 09:17 pm IST - SEOUL

Members of a club studying cryptocurrencies, attend a meeting at a university in Seoul, South Korea, December 20, 2017. Picture taken December 20, 2017.  REUTERS/Kim Hong-Ji

Members of a club studying cryptocurrencies, attend a meeting at a university in Seoul, South Korea, December 20, 2017. Picture taken December 20, 2017. REUTERS/Kim Hong-Ji

Hackers have stolen millions, lawmakers are pushing for new taxes and regulations, and a leading financial official has called them a “Ponzi scheme”.

But that hasn’t cooled a frenzy for bitcoin and other virtual currencies that is gripping young investors in South Korea.

On a recent night at Sungkyunkwan University in Seoul, more than a dozen students crammed into a classroom to share tips on investing in so-called cryptocurrencies, which have driven tales of fantastic returns for savvy investors.

The group sat in rapt silence broken only by a sudden shout of “there was just a big jump!” from someone monitoring his virtual currencies — as one student gave a presentation on how to read financial data and predict future trends.

“I no longer want to become a math teacher,” said 23-year-old Eoh Kyong-hoon, who founded the club, Cryptofactor. “I’ve studied this industry for more than 10 hours a day over months, and I became pretty sure that this is my future.”

Lack of jobs

Driven in part by a dismal economic outlook including an unemployment rate almost three times the national average — young South Koreans are flocking to virtual currencies despite the risks and warnings from officials, analysts say.

It’s a trend that has caught the eye of South Korean leaders and regulators, who announced new measures this week to regulate speculation in cryptocurrency trading.

Concerns about security and thefts of cryptocurrencies by hackers have also been rising. A South Korean cryptocurrency exchange recently shut down and filed for bankruptcy after being hacked for the second time this year.

“Young people and students are rushing into virtual currency trading to earn huge profits in just a short period of time,” Prime Minister Lee Nak-yeon said in November. “It is time for the government to take action as it could lead to serious pathological phenomena if left unchecked.”

Unchecked enthusiasm

Mr. Eoh said the talk of more regulation had not dented his plans, especially after making what he said was a 20-fold gain on his investments over the past six months.

He said that many students were bringing laptops to class to track the movements of their investments and participate in actual trading. “Even when professors are giving lectures right in front of them,” he said.

Gravitating to ‘altcoins’

Younger investors have especially gravitated toward so-called “altcoins”, or virtual currencies other than bitcoin, which often trade at much lower values, analysts say.

“Since young people are more mobile-friendly, they can actually make more out of altcoin investments as long as they are able to discriminate gems from pebbles,” said Kim Jin-hwa, one of the leaders of the Korea Blockchain Industry Association, an association of 14 virtual currency exchanges.

Iota, one of the fast-gaining altcoins, was traded at $0.82 in late November, but now stands at $3.89, a gain of 374.4%, according to Coinmarketcap.com. Energo (TSL), another type of altcoin, gained 400% during the same period.

Some young investors say they don’t sleep until after 2 a.m., when there is a lull in the cryptocurrency markets as investors in places like South Korea and Japan log off. Members of the club say they call each other to make important decisions together, and see information sharing as key to navigating the volatile cryptocurrency markets.

‘Athlete and investor’

“I literally knew nothing about cryptocurrencies or the economy,” said Lee Ji-woo, a 22-year-old sports industry major. “Everyone here has taught me a lot.”

It’s now emboldened her to dream of a different future. “I can have two jobs maybe, one as an athlete and another as an investor.”

But some in South Korea’s financial establishment say those hopes may be unfounded.

Kim Yong-beom, vice chairman of the Financial Services Commission, said Monday that the only reason prices were going up was because each investor expected the next buyer down the line to pay a higher price. “That really is a Ponzi scheme,” he said.

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