This year, the trading volume in South Korea's virtual asset market has dropped by more than half compared to last year. Analysts attribute this decline to a surge in the stock market, which has drawn investor interest away from virtual assets, coupled with a lack of investment products and regulatory uncertainties in the domestic market, prompting investors to turn to overseas exchanges.
According to the financial sector on September 7, the trading volume of the five major South Korean won-based virtual asset exchanges (Upbit, Bithumb, Coinone, Korbit, and Gopax) reached $3.67 billion in the first half of the year, a 54.6% decrease from the same period last year. The decline has accelerated this month, with trading volume down 79.2% compared to a year ago.
One reason for the decrease in virtual asset trading volume is the strong performance of the KOSPI index. Starting the year around 4,000 points, the KOSPI surged to nearly 9,000 points at one point, leading to a shift in investor interest and funds from virtual assets to the stock market.
Additionally, the low attractiveness of the domestic market is exacerbating the outflow of investors. The South Korean market remains largely focused on individual spot trading, while the global market has seen increased accessibility for institutional investors through Bitcoin and Ethereum spot exchange-traded funds (ETFs) and a variety of derivative products, including perpetual futures and options.
Uncertainties surrounding regulations related to virtual assets are also cited as a factor diminishing investment appeal. Each time the government announces regulatory policies, virtual asset prices and trading volumes fluctuate, making it difficult for investors to establish long-term investment plans. Consequently, many investors are seeking to trade products not available domestically on overseas exchanges.
The prolonged reverse Kimchi premium, which indicates weakened domestic investment demand, is also noteworthy. From June 20 to July 24, Bitcoin was traded at lower prices in South Korea than overseas for 35 consecutive days, marking the longest such period since statistics began being recorded. The disappearance of the Kimchi premium, which previously indicated higher prices in South Korea, suggests a significant weakening of buying interest in the domestic market.
According to related analyses, the volume of virtual assets moved from domestic exchanges to overseas exchanges is estimated to be around 700 trillion won from 2021 to 2026. This year, the outflow is projected to reach approximately 77 trillion won. However, this figure represents the total amount moved overseas, excluding any inflows back to South Korea.
A financial sector official explained, "With minimal price differences between overseas and domestic exchanges, and the perception that investor sentiment remains strong in overseas markets, many investors are turning their attention to foreign exchanges."
The decline in trading volume is hitting the performance of domestic exchanges hard. South Korean virtual asset exchanges rely heavily on trading fees for revenue, so a decrease in trading volume directly impacts their profits.
Dunamu, the operator of Upbit, reported an operating profit of 111.4 billion won in the first half of the year, a 79.7% drop from the same period last year. Bithumb's operating profit fell 83.4% to 14.9 billion won during the same timeframe. Coinone and Korbit are also estimated to have incurred losses ranging from 10 billion to 20 billion won.
The challenge lies in the potential difficulty of recovering performance in the second half of the year. With virtual asset taxation set to take effect in January, concerns are growing that investor sentiment may further weaken.
A financial sector official stated, "The lack of diverse investment products compared to overseas markets, along with delays in the regulation of stablecoins, is diminishing the investment appeal of the domestic market."
* This article has been translated by AI.
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