South Korea has emerged as a significant and unique player in the global cryptocurrency landscape. Recent data reveals that over 10% of the country's population, approximately 6 million people, are invested in digital assets. This high level of adoption is characterized by distinct preferences and behaviors, largely centered around domestic centralized exchanges.
Understanding the dynamics of this market provides valuable insights for global projects and investors. The ecosystem is dominated by a few key platforms, each with its own strategies and user base, creating a fascinating microcosm of crypto activity.
Market Overview and Trading Volume Trends
The trading volume on centralized exchanges (CEXs) in South Korea has followed global patterns, albeit with some notable regional twists. After a peak in March, overall volume saw a decline. From a high of $45 billion in February, total volume on the four major Korean exchanges dropped sharply to $23 billion by May.
However, a significant recovery was observed, with volume climbing back to $37 billion in July. This rebound was more pronounced than that of global giant Binance during the same period. When compared to international peers, the combined volume of South Korea's top four exchanges consistently hovered around 10% of Binance's volume throughout much of the year. Interestingly, they often surpassed the trading volume of Coinbase, underscoring their substantial influence despite being regional platforms.
A key indicator of the market's strength is its growing share relative to global leaders. The proportion of trading volume compared to Binance grew from 7% in March to 16% by September. This growth highlights the increasing activity and relevance of the South Korean crypto trading scene on the world stage.
Exchange Dominance and Competitive Landscape
The South Korean exchange market is a story of overwhelming dominance by a single player.
Upbit's Market Leadership
Upbit firmly controls the market, commanding approximately 80% of the total trading volume. It reached a monumental $36 billion in monthly volume during its peak in February. While its share dipped briefly to 70% in August, it quickly recovered its dominant position the following month. This consistent performance solidifies its position as the gateway for most Korean crypto investors.
The Challengers
The remaining market share is divided among three other significant exchanges:
- Bithumb holds a steady second place, capturing between 15% to 20% of the total volume from the top four exchanges.
- Coinone maintains a smaller but consistent share, typically between 3% and 5%.
- Korbit rounds out the group with a share of less than 1%.
This landscape demonstrates a highly concentrated market where one exchange sets the tone for the entire region.
The Impact of Zero-Fee Trading
In a bold move to compete, Bithumb implemented a zero-trading-fee policy on October 4th. The initial market response was positive; the exchange saw a immediate surge in activity, and its market share climbed to over 20%.
However, this boost proved to be short-lived. The increased market share quickly reverted to pre-policy levels, indicating that transaction costs are not the primary factor driving Korean investors' choice of exchange. The long-term sustainability of such a strategy is also questionable, as it removes a fundamental revenue stream for the exchange. This experiment revealed that user loyalty and other platform features often outweigh the appeal of free trades.
Investor Preferences: A Focus on Altcoins
A striking difference between South Korean and Western markets lies in investor preference. Analysis reveals a strong inclination towards altcoins rather than the major cryptocurrencies that dominate elsewhere.
Upbit vs. Coinbase: A Study in Contrasts
This becomes clear when comparing Upbit to a platform like Coinbase. On Coinbase, a significant majority of trading volume (around 85%, according to their Q2 shareholder letter) comes from institutional investors. These investors prioritize portfolio stability, leading to high trading volumes in Bitcoin (BTC) and Ethereum (ETH).
In contrast, Upbit is predominantly used by retail investors who are actively seeking high-growth opportunities. Consequently, trading on Upbit is heavily focused on altcoins with perceived high profit potential, accepting the accompanying higher risk.
Top-Traded Assets
This preference is quantified by looking at the concentration of trading volume for specific assets within Korea compared to the global market. For instance, in a recent weekly analysis:
- LOOM saw 62% of its global trading volume occur in South Korea.
- XEC and FLOW followed at 55% and 43%, respectively.
- STX and BSV also made the list with 37% and 34% of their volume originating from Korean exchanges.
This data confirms that certain projects find a disproportionately large and active audience within the Korean market. For a deeper look at how different assets perform across various markets, you can explore more strategies for regional analysis.
The "Kimchi Coin" Phenomenon
The uniqueness of the Korean market is further exemplified by the existence of so-called "Kimchi Coins." These are cryptocurrencies that are traded almost exclusively on Upbit and are largely ignored by the global market.
Examples include Steem Dollars (SBD), Moss Coin (MOC), and Hippocrat (HPO), which see 100% of their global trading volume on Upbit. Others like Sentinel Protocol (UPP) and Aha Token (AHT) are also predominantly traded there. These tokens have cultivated their own self-contained ecosystems and liquidity pools primarily consisting of Korean investors.
Conversely, major global assets like BTC, ETH, and MATIC have surprisingly low trading volumes on Upbit relative to their worldwide activity. This stark contrast highlights the distinct and sometimes isolated nature of investor behavior within the region.
Deposit and Withdrawal Trends: Network Preferences
The way users move assets on and off exchanges also reveals important trends. Upbit users show a strong preference for the Tron network over Ethereum for deposits and withdrawals. In fact, the transaction volume on Tron is five times greater than on Ethereum.
This preference is driven by practicality. The Tron network offers significantly lower transaction fees and faster processing times compared to the often-congested and expensive Ethereum network. Global data from Coinmetrics supports this, showing 2 million daily USDT transactions on Tron versus only about 100,000 on Ethereum.
This behavior suggests that for many Korean investors, the primary use case for crypto transfers is moving funds between exchanges—particularly to access international platforms that offer services like futures and margin trading which may not be available on domestic exchanges—rather than engaging with on-chain DeFi protocols.
Frequently Asked Questions
What percentage of South Koreans invest in cryptocurrency?
It is estimated that over 10% of the South Korean population, or about 6 million people, have invested in cryptocurrency. This remarkably high adoption rate makes it one of the most active retail markets in the world per capita.
Which cryptocurrency exchange is most popular in South Korea?
Upbit is the dominant exchange by a significant margin, controlling approximately 80% of the domestic market share. Bithumb is its closest competitor, typically holding a 15-20% share of the trading volume among the top four exchanges.
Why do Korean investors prefer altcoins?
The market is largely driven by retail investors seeking high returns. This risk-on attitude leads to a greater focus on altcoins with high growth potential compared to Western markets, which have a larger proportion of institutional investors focused on the stability of major assets like Bitcoin and Ethereum.
What are "Kimchi Coins"?
This is a informal term for cryptocurrencies that are traded almost exclusively on South Korean exchanges, particularly Upbit, and have little to no trading volume or recognition on global platforms. They form their own isolated markets within the Korean ecosystem.
How can global crypto projects enter the South Korean market?
The unique characteristics of the market mean that a tailored strategy is essential. Simply listing a token is not enough. Projects need targeted marketing, community building, and an understanding of local investor preferences, which often differ greatly from global trends. To effectively navigate these regional nuances, it's crucial to get advanced methods for market entry.
Why do Korean users prefer the Tron network?
The preference for Tron for deposits and withdrawals is primarily due to its low transaction fees and fast processing speeds. This is especially important for users who are frequently moving funds between exchanges to arbitrage or access different trading products.
Conclusion
The South Korean cryptocurrency market is a powerhouse of retail investment with a unique identity. Characterized by the dominance of Upbit, a strong retail-driven appetite for altcoins, and the existence of a self-contained ecosystem of "Kimchi Coins," it operates with its own distinct set of rules and preferences.
For global projects, understanding these nuances is not just beneficial—it's essential for success. The market demonstrates that a one-size-fits-all global strategy is often insufficient. A tailored approach that respects and leverages local investor behavior is key to engaging with one of the world's most vibrant and active crypto communities.