Bitcoin defies $800 million crypto wipeout as South Korea’s AI stock market crashes

Bitcoin rebounded above $83,000 on Tuesday despite a sharp Asian stock selloff, as cryptocurrency liquidations exceeded $800 million.

BTC recovered after briefly slipping below $81,000, while semiconductor shares continued a deepening rout that sent South Korea's benchmark KOSPI index down 6%.

South Korea's AI stock collapse exposes concentrated market risks

Reports noted that South Korea's KOSPI plunged up to 7.4% before recovering some losses to close at 6,035.35. The decline briefly pushed the index below 6,000 and triggered a sell-side trading curb as the country's largest semiconductor manufacturers extended their losses.

Samsung Electronics fell 7.39%, while SK Hynix declined 10.09%, marking a fifth consecutive session of losses for both companies.

Together, the two memory-chip manufacturers account for approximately half of the KOSPI's market capitalization, leaving the broader index particularly sensitive to changes in the outlook for AI infrastructure spending.

Foreign investors sold approximately 4.5 trillion won ($3.35 billion) of Korean equities during Tuesday's session, extending a series of withdrawals that have weighed heavily on the country's technology sector.

Investment research firm Paradis Labs said the decline reflected a sustained retreat by foreign institutions from Samsung and SK Hynix.

The firm characterized the prevailing institutional strategy as “Sell Korea, Buy US,” while noting that domestic investors had largely remained patient, with some capital rotating from memory-chip manufacturers into financial stocks.

Paradis Labs also said the deterioration had been building for several sessions, pointing out that recent comments from Broadcom Chief Executive Officer Hock Tan had intensified an existing selloff.

Tan compared speculative AI investment to gambling, adding to concerns that the industry's enormous capital commitments might not generate sufficient returns.

Those remarks coincided with a technological announcement from China's ChangXin Memory Technologies, which said it had developed a DRAM architecture capable of reducing memory-cell area by approximately 30%.

The company plans to introduce products incorporating the technology by the end of 2026, raising concerns about potential competition for South Korean memory producers. Its ability to manufacture the technology commercially at scale remains unproven.

Bitunix analysts said the broader correction reflected growing sensitivity to the financing risks and concentrated investor positioning supporting the AI industry.

The analysts noted that strong semiconductor earnings had not prevented heavy selling, with reduced leveraged exposure and diminished support from share buybacks potentially amplifying the decline.

The pressure has also influenced broader institutional positioning. BlackRock downgraded US equities from overweight to neutral and increased its preference for short-term Treasuries as concerns about AI-related volatility and higher borrowing costs intensified.

Meanwhile, Paradis Labs warned that South Korea's dependence on imported crude oil created another vulnerability as tensions involving Iran escalate. Sustained energy-price increases could compound inflation pressures and weaken confidence in the country's equity market.

The semiconductor weakness has already spread beyond Korea, as the Philadelphia Semiconductor Index declined 2.7% on Monday, while Japan's Nikkei 225 fell 1.8% Tuesday.

Bitcoin's recovery faces pressure after $813 million liquidation wave

Bitcoin's rebound contrasted with sharp losses in Asian equities, but it followed a derivatives market shakeout that wiped out hundreds of millions of dollars in leveraged positions.

According to CoinGlass data, cryptocurrency liquidations reached $812.9 million over 24 hours, affecting 170,209 traders. Bullish positions accounted for $686.72 million, or 84.5% of the total, compared with $126.19 million in bearish bets.

Bitcoin recorded the largest losses at $192.14 million, with long positions accounting for nearly 74% of the total. Ethereum followed with $180.5 million, while Solana saw $60.85 million in liquidations. The largest single liquidation was a $9.65 million Bitcoin long position on Binance.

As Bitcoin declined, forced long-position closures added selling pressure and accelerated the downturn. The subsequent recovery also caught bearish traders off guard, with short liquidations contributing to the sharp reversal.

Yet underlying trading activity suggests that buyers have struggled to regain control despite the price recovery.

CryptoQuant analyst JA Maartunn reported that Bitcoin's Net Taker Volume turned negative again, indicating that aggressive selling in derivatives markets outweighed buying activity.

The reading points to continued selling pressure even as Bitcoin recovers, so passive buying and the closure of bearish positions may be supporting prices without a sustained increase in aggressive demand.

That leaves Bitcoin's recovery exposed to another test if the equity selloff deepens or leveraged traders rebuild positions ahead of Wednesday's US inflation report.