South Korea has emerged as a significant player in the global cryptocurrency landscape. According to a survey by Korea's Financial Intelligence Unit (KoFIU), an estimated 6 million Koreans, representing over 10% of the country's population, are cryptocurrency investors. This substantial investor base primarily engages in activities centered around centralized exchanges (CEXs), which wield considerable influence in the local market.
This analysis delves into the characteristics and tendencies of Korean crypto investors by examining data from the nation's four major exchanges: Upbit, Bithumb, Coinone, and Korbit.
Market Share Growth Amid Global Decline
Globally, trading volume on centralized exchanges has been on a downward trend since its peak in March. During this period, market volatility also decreased, with the price of Bitcoin remaining relatively stable between $27,000 and $28,000 from the end of March through September.
The Korean exchange market mirrored this initial decline. Total trading volume across the four major platforms plummeted from a peak of $45 billion in February to $23 billion in May. However, a notable recovery followed, with volume surging to $37 billion in July. Interestingly, this rebound was more pronounced compared to that of Binance, the world's largest cryptocurrency exchange.
A comparative analysis reveals that the combined trading volume of the four major Korean exchanges consistently hovered around 10% of Binance's volume throughout much of the year. Their trading activity even surpassed that of the U.S.-based giant Coinbase during the same periods, underscoring the significant position South Korean exchanges hold in the international market.
Furthermore, the market share of these Korean platforms has been steadily increasing. Their trading volume relative to Binance grew from 7% in March to 16% by September, a clear indicator of their expanding influence.
The Dominance of Upbit
Upbit solidly maintains its position as the market leader in South Korea. In February, it recorded a monumental $36 billion in trading volume, capturing approximately 80% of the domestic market share. Although its dominance saw a temporary dip to 70% in August, it swiftly rebounded to 80% the following month, reaffirming its overwhelming monopoly.
Among the other exchanges, Bithumb consistently holds the second-place position, accounting for 15% to 20% of the total trading volume across the big four. Coinone follows with a market share ranging from 3% to 5%, while Korbit's presence remains relatively limited at under 1%.
Impact of Bithumb's Zero-Fee Initiative
In a bold move to challenge Upbit's hegemony, Bithumb, the second-largest exchange, implemented a zero-trading-fee policy on October 4th. The policy initially yielded positive results, driving a significant increase in Bithumb's trading volume and elevating its market share to over 20%.
However, the impact of this aggressive strategy proved to be short-lived. Bithumb's market share quickly reverted to its pre-policy levels, indicating that the initial surge was not sustainable.
This experiment suggests that Korean investors' choice of exchange is not solely determined by transaction fees. The long-term viability of such a strategy is also questionable, as it eliminates a primary revenue stream for the exchange, raising concerns about its sustainability.
A Tale of Two Exchanges: Upbit vs. Coinbase
A comparative look at Upbit and the U.S.-based Coinbase reveals starkly different investor profiles and preferences. On Coinbase, a significant portion of the trading volume is dominated by Bitcoin (BTC) and Ethereum (ETH). In contrast, these major cryptocurrencies constitute only a small fraction of Upbit's total trading activity.
Upbit is predominantly driven by retail investors who show a strong appetite for altcoins with high profit potential, willingly accepting the associated risks. This preference is a key reason why altcoin trading occupies a much larger share of the South Korean market.
Coinbase, on the other hand, derives the bulk of its volume from institutional investors. According to its Q2 shareholder letter, institutional trading accounts for approximately 85% of Coinbase's total volume. These investors typically prioritize portfolio stability, which explains the higher relative trading volume of established assets like BTC and ETH.
Unique Characteristics of the Korean Market
An analysis of the most actively traded cryptocurrencies in Korea versus global markets highlights distinct local preferences. For instance, tokens like LOOM, XEC, and FLOW have seen a disproportionately large share of their global trading volume occur on Korean exchanges.
Exchange policies also have a direct and immediate impact. For example, when FLOW temporarily suspended deposits and withdrawals on October 14th, its price and trading volume on Korean exchanges surged significantly. This phenomenon often occurs when arbitrage trading with overseas exchanges is halted due to such suspensions.
While some tokens like Loom Network (LOOM) and Flow (FLOW) experience temporary spikes in attention, others such as Stacks (STX) and eCash (XEC) maintain a consistent and strong presence on Korean exchanges regardless of global trends. These assets have carved out a sustained niche within the Korean market.
A Deep Dive into Upbit's Investor Base
The uniqueness of the Korean market is perhaps most evident on Upbit. Certain cryptocurrencies, including Steem Dollars (SBD), Moss Coin (MOC), and Hippocrat (HPO), see 100% of their global trading volume occur exclusively on Upbit. Other assets like Sentinel Protocol (UPP), Aha Token (AHT), and Groestlcoin (GRS) are also traded primarily on the platform.
These tokens, often colloquially referred to as "kimchi coins," are largely ignored by the global market but have cultivated their own vibrant ecosystem driven predominantly by Korean retail investors on Upbit.
Conversely, cryptocurrencies that dominate global markets, such as BTC, ETH, and MATIC, have surprisingly low trading volumes on Upbit relative to their worldwide activity. This stark contrast underscores the unique characteristics of the Upbit ecosystem and reflects the distinct preferences of its user base. It is important to note, however, that Upbit's overall trading volume is lower than that of global behemoths like Binance, which contextualizes the lower volume for these major assets.
This regional uniqueness suggests that global cryptocurrency projects must develop and implement tailored go-to-market (GTM) strategies that account for the specific characteristics of each locality. 👉 Explore more market entry strategies
Analyzing Upbit's Deposit and Withdrawal Networks
Data from a recent week reveals a strong preference among Upbit users for the Tron network over Ethereum for deposits and withdrawals. The transaction volume on the Tron network was five times greater than that on Ethereum.
This preference is largely driven by practicality. The Tron network offers significantly lower transaction fees and faster processing times compared to the Ethereum network. Global data from Coinmetrics supports this trend, showing daily USDT transaction volumes on the Tron network reaching 2 million, dwarfing Ethereum's roughly 100,000. Tron's clear advantage for simple value transfer is evident in the behavior of Upbit users and Korean investors at large.
This tendency also indicates that the primary purpose of these transfers for many Korean investors is to move funds between overseas and domestic exchanges, rather than for interacting with on-chain decentralized applications (dApps). This is noteworthy, given that Ethereum boasts the highest Total Value Locked (TVL) and the greatest number of on-chain protocols.
Two main reasons help explain this investor behavior. First, many users leverage deposit/withdrawal services to access products on international exchanges—such as futures and margin trading—that are not offered on regulated Korean platforms. Second, due to certain limitations of Korean exchanges (like the inability to handle dollar-backed stablecoins or a lack of diverse withdrawal networks), users seeking on-chain engagement might first transfer funds to an overseas exchange that offers more flexible withdrawal options.
Frequently Asked Questions
What percentage of South Koreans invest in cryptocurrency?
Over 10% of the South Korean population, approximately 6 million people, are estimated to be cryptocurrency investors. This high adoption rate highlights the deep penetration of digital assets within the country.
Which is the largest cryptocurrency exchange in South Korea?
Upbit is the dominant exchange in South Korea, commanding an overwhelming 80% market share. It significantly outpaces its competitors, with Bithumb a distant second.
Why do Korean investors prefer altcoins?
Korean retail investors, particularly on Upbit, are known for their strong interest in altcoins. They are often more willing to embrace higher risks for the potential of greater returns, which shapes the unique altcoin-heavy composition of the local market compared to more BTC/ETH-dominated Western markets.
What is a "kimchi coin"?
"Kimchi coin" is an informal term for cryptocurrencies that are traded almost exclusively on South Korean exchanges like Upbit. These tokens, such as SBD or MOC, see little to no trading volume on major global platforms.
Which network do Korean investors prefer for transfers?
Data shows a strong preference for the Tron network due to its low fees and fast transaction times. Tron handles a volume of transfers that is five times greater than Ethereum on Upbit, primarily for moving stablecoins like USDT.
Did Bithumb's zero-fee trading policy work?
The policy initially succeeded in boosting Bithumb's trading volume and market share. However, the effect was temporary, and its market share soon returned to previous levels, indicating that fee structures are not the sole factor for Korean investors when choosing an exchange.