Korea's cryptocurrency market is freezing over rapidly. More than 11 million investors have signed up with exchanges, but fewer than 20% actually trade. Trading volume has shrunk to around 1% of the stock market, and invested funds have more than halved in just a year and a half. Analysts say a "crypto exodus" is now in full swing, driven by a combination of a surge in Korea's stock market and capital moving to overseas exchanges.
11 Million Signed Up, but Only 20% Trade; Invested Funds Halved
According to data submitted by the Financial Supervisory Service (FSS) to Rep. Lee Jong-wook of the People Power Party, a member of the National Assembly's Finance and Economy Planning Committee, on the 2nd, the number of users who had completed Know Your Customer (KYC) verification and were eligible to trade on Korea's five largest crypto exchanges (Upbit, Bithumb, Coinone, Korbit, and GOPAX) stood at 11,155,038 as of the end of June this year. However, of these, active users who conducted at least one trade, exchange, or staking (deposit) over the past month numbered 2,169,780, an activity ratio of just 19.5%.
The active user ratio fell from 35.7% at the end of January last year, nearly halving in a year and a half. The number of trade-eligible users also fell by more than 400,000 in three months after peaking at 11.56 million at the end of March this year.
Capital outflows were also pronounced. Korean investors' cryptocurrency holdings declined 54.7%, from 125.7533 trillion won at the end of January last year to 56.9606 trillion won at the end of June this year. Deposits at exchanges also fell by about half over the same period, from 10.6561 trillion won to 5.22 trillion won. This is interpreted as the domestic market directly reflecting the shrinkage of global cryptocurrency market capitalization from $4.28 trillion to $2.18 trillion.
Trading Volume at 1% of KOSPI; Funds Move to Overseas Exchanges and Stocks
Trading volume has also contracted sharply. According to cryptocurrency information provider CoinGecko, the average daily trading volume of Korea's five largest exchanges from the 1st to the 21st of last month came to 597.8 billion won. That is just 1.59% of the average daily trading volume of the securities market (37.6687 trillion won) over the same period.
The trading ratio relative to KOSPI recorded 11.29% in January and 12.03% in February this year, then fell to 6.24% in March and 6.67% in April, before dropping to 2.03% in May. It appeared to recover somewhat to 6.93% last month, but slumped back to around 1% in July. In fact, this month, trading volume fell short of 1% of KOSPI on six of 10 trading days.
Polarization among exchanges has also intensified. By July trading volume, Upbit's market share was 68.17% and Bithumb's was 24.61%, with the two together accounting for more than 92% of all trading. By contrast, Coinone came to 5.73%, Korbit 1.47%, and GOPAX just 0.10%.
The industry attributes the decline in trading to the movement of investment funds into the stock market amid a surge in Korean equities led by semiconductor stocks, as well as the fact that domestic exchanges focus on spot trading while overseas exchanges offer futures, leverage, and a variety of investment products.
Ki Young Ju, CEO of CryptoQuant, analyzed that "at overseas exchanges, Bitcoin and Ethereum account for 50 to 70% of trading, but in Korea the share of altcoins is excessively high," adding, "This is why capital outflows have appeared more prominently in the domestic market during the market downturn."
Park Seong-je, a researcher at Shinhan Securities, also told News1: "In Korea, in practice only spot trading is possible, whereas overseas exchanges allow futures and leverage trading, so investment demand is moving to Binance and others. The incentive to trade on domestic exchanges is growing weaker."
