Source/DeSpread Research
Compile/Nick
According to a survey by the Korea Financial Intelligence Unit (KoFIU), the number of cryptocurrency investors in South Korea is estimated to be 6 million, accounting for more than 10% of the country’s total population, which is a staggering number. However, most of these investors are mainly engaged in investment activities centered on centralized exchanges, which makes the influence of centralized exchanges significant in the Korean cryptocurrency market.
Below we will explore the characteristics and tendencies of Korean investors through data from Korean centralized exchanges. The analysis is mainly based on data from four major exchanges: Upbit, Bithumb, Coinone and Korbit. Part of the analysis is based on data from the third week of October (14th to 20th).
South Korean exchanges' share of trading volume increases despite overall decline in trading volume
Centralized exchange (CEX) trading volume has been on an overall downward trend since peaking in March this year. During this period, market volatility also decreased. The price of Bitcoin was relatively stable at around US$27,000 to US$28,000 from the end of March to the end of September, without significant fluctuations in half a year.
Korean exchanges are no exception. Total transaction volume dropped sharply to $23 billion in May after peaking at $45 billion in February. But it has since shown an upward trend, with trading volume reaching $37 billion in July, a larger increase compared to Binance, the world’s largest cryptocurrency exchange.
Through comparative analysis with Binance, the trading volume of South Korea’s four major exchanges this year is at a level of about 10% compared to Binance. Especially compared to Coinbase during the same period, their trading volume is higher, which shows that South Korean exchanges have a significant position in the international market.
In addition, the market share of South Korea’s four major exchanges continues to rise. Trading volume relative to Binance grew from 7% in March to 16% in September. This is an indicator reflecting the increasing influence of domestic exchanges.
Upbit’s monopoly position
In February this year, Upbit hit a peak trading volume of $36 billion, accounting for approximately 80% of South Korea’s cryptocurrency exchange market, maintaining its dominant position. Although the market share briefly dropped to 70% in August, it quickly rose back to 80% the following month, showing a continued growth trend.
Among Bithumb, Coinone and Korbit's market share, Bithumb ranks second in the market, accounting for 15% to 20% of the total trading volume of the four major exchanges. Coinone's market share is between 3% and 5%, and Korbit's share Less than 1%, the market share is relatively limited.
Bithumb’s zero-fee policy
Bithumb, South Korea’s second largest exchange, implemented a 0-fee policy on October 4. This policy initially had a positive impact, with Bithumb’s trading volume increasing and its market share exceeding 20%.
However, the impact of the fee-free policy did not last long, and Bithumb’s market share returned to the pre-policy level.
While Bithumb’s fee-free policy was initially effective in increasing market share, it is uncertain whether it can be sustained in the long term. This also shows that Korean investors’ choice of exchanges does not entirely depend on whether they charge fees. Additionally, there are concerns about the sustainability of this policy, as it removes a major source of revenue for the exchange.
Coinbase vs Upbit comparison
While Upbit’s BTC and ETH trading volume represents only a small portion of total trading volume, the Coinbase exchange accounts for a larger share of trading volume for these two cryptocurrencies. Most individual investors on Upbit show strong interest in altcoins with high profit potential and tend to accept the associated high risks. This is also considered to be one of the reasons for the high proportion of altcoin transactions in the Korean market.
Unlike Upbit, where individual investors dominate, Coinbase’s trading volume is driven by institutional investors. Institutional investors account for approximately 85% of Coinbase’s total trading volume, according to Coinbase’s second-quarter shareholder letter. They tend to pursue portfolio stability, which is why BTC and ETH trade account for a relatively high proportion.
Korean market characteristics
The chart above shows which cryptocurrencies South Korean investors are primarily interested in. By analyzing the data of the most actively traded cryptocurrencies in South Korea last week compared with the global market, we found that LOOM had the highest trading volume, accounting for 62%, ranking first. This is followed by XEC at 55% and FLOW at 43%. STX and BSV also made the list with 37% and 34% respectively.
Impact of exchange deposit and withdrawal policies: Changes in Korean exchange deposit and withdrawal policies will have a direct impact on prices and trading volumes. Specifically, on October 14, while deposits and withdrawals were suspended, FLOW experienced a significant increase in price and trading volume compared to the previous day. This phenomenon occurs when arbitrage trading with overseas exchanges becomes impossible due to suspension of deposits and withdrawals.
Additionally, while some cryptocurrencies will temporarily gain traction, such as Loom Network and Flow, cryptocurrencies like Stacks and eCash continue to gain traction on Korean exchanges regardless of temporary events. Notably, they continue to trade in the Korean market and are not affected by global trends.
Upbit investor in-depth analysis
Among the cryptocurrencies traded on Upbit, Steem Dollars ($SBD), Moss Coin ($MOC), and Hippocrat ($HPO) account for 100% of global trading volume and are traded exclusively on Upbit. Additionally, cryptocurrencies such as Sentinel Protocol ($UPP), Aha Token ($AHT), and Groestlcoin ($GRS) are also primarily traded on Upbit and are known as picklecoins due to their lack of attention in the global market. These tokens are mainly traded by Korean investors and have formed their own market on the Upbit platform.
Cryptocurrencies that dominate global markets, such as BTC, ETH, and MATIC, have massive trading volumes across the globe. However, their trading volumes are surprisingly low on the Upbit exchange. This phenomenon demonstrates that Upbit has unique characteristics compared to global markets, reflecting regional differences in investor preferences and investment strategies. However, it is important to note that Upbit’s total trading volume is relatively low compared to global giant exchanges such as Binance, so the low trading volumes of these major cryptocurrencies should also be taken into account.
As mentioned above, the Korean market is unique compared to global markets, and this is likely to apply to other regions as well. This suggests that global cryptocurrency projects need to develop and implement tailored go-to-market (GTM) strategies based on the characteristics of each region.
Upbit deposit and withdrawal network analysis
The chart above shows the proportion of Upbit users’ transactions using the Ethereum and Tron networks for deposits and withdrawals over the past week. Data shows that the transaction volume on the Tron network is 5 times that of Ethereum.
Compared to Ethereum, Upbit users tend to actively use the Tron network for deposits and withdrawals. This is because transaction fees on the Ethereum network are relatively high, while the Tron network has low fees and fast transaction processing speeds. According to Coinmetrics data, up to 2 million USDT transactions are conducted through the Tron network every day, while the transaction volume of Ethereum is only about 100,000, which shows that the Tron network has a clear advantage in simple transfer transactions on a global scale. This phenomenon is also evident in the deposit and withdrawal trends of Upbit users and Korean investors.
In addition to the above reasons, considering that the Ethereum network has the highest TVL and the most on-chain protocols, it can be understood that the purpose of Korean investors’ deposits and withdrawals is more to transfer funds between overseas centralized exchanges and Korean exchanges , instead of using on-chain products. There are many reasons for this investor preference, but two main ones are worth considering.
Upbit users and Korean investors primarily use the exchange for cryptocurrency trading, and they use cryptocurrency deposit and withdrawal services to access products offered by overseas exchanges that are not available in Korea, such as futures markets and margin trading.
Due to the insufficient services provided by Korean centralized exchanges, users who wish to deposit and withdraw funds in an on-chain environment may be more inclined to withdraw funds in an on-chain environment after sending money to overseas exchanges. Lack of service may include the inability to process stablecoins in U.S. dollars and a lack of diversity in the withdrawal network.
Gyro Finance contact information
Business Cooperation|Contribution:
Xiao Huang (WeChat ID 18925291949)
Ning (WeChat ID 13631579042)
Recommended reading
