[Click eStock] "The Meaning of Bitcoin 100 Million and KOSPI 2700"

Yuanta Securities analyzed the significance of Bitcoin reaching 100 million KRW and the KOSPI hitting 2700 points in its stock market investment strategy report on the 15th, interpreting these as demands for diversification and asset allocation.

At the beginning of the week, Bitcoin's price surpassed 100 million KRW, and the KOSPI also exceeded the 2700-point mark for the first time in nearly two years. Kang Daeseok, a researcher at Yuanta Securities, stated, "In the case of Bitcoin, the approval of spot ETFs has established it within the institutional framework, recognizing it as an asset class that can be included in portfolios," adding, "Even a small allocation in a traditional portfolio confirms diversification benefits," and concluded, "This reflects a demand for diversification into assets outside the stock market due to concerns about market concentration."

He also analyzed that the domestic stock market is benefiting from the expansion of diversification. Kang said, "If Bitcoin benefits from the demand for diversification into non-stock assets, the domestic stock market can benefit from diversification demand due to its relatively low concentration risk within the global stock market."

Although there has been a concentration in large-cap stocks in the domestic market, it is considered much less burdensome compared to the U.S. stock market. Especially, unlike the U.S. and Japan, the IT sector concentration has eased since the beginning of the year, partly due to expectations from the value-up program. The domestic market is expected to continue benefiting from the global expansion of diversification demand.

On the 11th, as Bitcoin continued its upward trend and surpassed 100 million KRW, the Bitcoin price was displayed on the electronic billboard at the Upbit Customer Support Center in Gangnam-gu, Seoul. Photo by Jo Yongjun jun21@

Is the Current Cryptocurrency Rally Different?

At the beginning of the week, Bitcoin's price exceeded 100 million KRW. The KOSPI also reached the 2700-point level the previous day. This is the first time in nearly 23 months since April 2022 based on closing prices. This trend somewhat contrasts with the global stock markets led by the U.S. and Japan, which have been taking a breather since March.

First, the strength of Bitcoin's price surpassing 100 million KRW early in the week shows a somewhat different pattern from previous bull markets. In past cryptocurrency bull markets, altcoins tended to outperform Bitcoin, leading to a decline in Bitcoin's market share.

However, recently, Bitcoin has been leading the bull market while maintaining a high market share. This phenomenon is believed to be mainly due to the inflow of funds through institutional markets following the approval of spot ETFs, especially centered in the U.S.

Ultimately, Demand for Diversification and Asset Allocation

Researcher Kang Daeseok explained, "There is a saying that supply and demand follow performance," meaning "the strength in cryptocurrency prices itself acts as an inducement for subsequent demand." He also judged that the burden caused by the increasing concentration within the stock market plays a significant role.

In emerging markets, concentration has not been strong due to China's sluggish performance, but in developed countries, especially the U.S., concentration has intensified. Globally, the decoupling between the U.S. and China has steepened the concentration gradient.

This situation is believed to be increasing demand for diversification of investment assets. Even arbitrarily reducing 0.5 percentage points from a traditional portfolio and allocating just 1% to Bitcoin shows diversification benefits.

Ultimately, as Bitcoin begins to establish itself within the institutional framework, a kind of going-concern assumption is formed, leading to diversification demand within the stock market spreading to Bitcoin.

Domestic Stock Market Also Benefits from Expanded Diversification

The domestic stock market is considered to be in a similar environment. If Bitcoin reflects demand for diversification into assets other than stocks, the domestic market could reflect demand for diversification into regions other than the U.S. within the global stock market.

The sustained interest of foreign investors in the domestic value-up program is also seen as part of the diversification demand arising from the intensified concentration in the U.S. stock market, centered on AI and tech sectors.

Although there has been a concentration in large-cap stocks in the domestic market, it is understood to be much less burdensome compared to the U.S. stock market. Furthermore, due to expectations from the value-up program formed since the end of January, IT sector concentration has eased since the beginning of the year, unlike in the U.S. and Japan.

Researcher Kang said, "The breakthrough of Bitcoin at 100 million KRW and the KOSPI at 2700 points signifies the emergence of diversification demand in financial markets," and added, "The domestic stock market, which still has relatively low concentration risk, is likely to continue benefiting."