South Korea's small cryptocurrency exchanges halves trading volume, turning to financial transactio

The transaction volume of South Korea's top five cryptocurrency exchanges plunged 54.6% in the first half of the year. Transformation Survival

After the transaction volume in the first half of the year fell 54.6% compared with the same period last year, South Korea's top five Won-based cryptocurrency exchanges are rebuilding their businesses around bank-brokerage cooperation, institutional services and regulatory compliance. As trading volumes fell by 55%, exchanges have adjusted their business models to survive.

What happened to the Korean cryptocurrency market?

The combined transaction volume of Upbit, Bithumb, Coinone, Korbit and Gopax in the first half of the year reached US$366.58 billion, a year-on-year decrease of 54.6%. The cumulative transaction volume of these five companies from July 1 to 27 was approximately 17.3 trillion won, a decrease of 16.9% from the same period last month. In recent months, the cryptocurrency market has continued to shrink relative to the South Korean stock market.

In July, the average daily trading volume of the five exchanges was 597.8 billion won (approximately US$406.5 million), which was only 1.59% of the average daily trading volume of South Korea's KOSPI stock market. This ratio exceeded 11% in January, dropped to about 6% in March and April, and further dropped to about 2% in May. For comparison, in November 2024, the single-day trading volume of domestic cryptocurrencies reached 21 trillion won, when traders bet that Trump would introduce a friendly crypto-policy in his second term.

It is worth noting that in the first half of the year, the average daily volatility of Bitcoin was only 1.25%, and that of altcoins was 1.79%, both lower than KOSPI's 4.67%. The price of Bitcoin hovered between 60,000 and 63,000 US dollars. Some retail investors have moved money into stocks to chase the rising KOSPI index.

Korbit sold 15 bitcoins and 60 Ethereum in ten days, raising approximately US$11.6 million (1.6 billion won). Dunamu (Upbit operator)'s first-quarter revenue and operating profit fell 55% and 78% year-on-year, respectively. A director at Tiger Research called the current situation the "second cryptocurrency winter", citing the sharp decline in the total market value and no new projects emerged.

However, on July 28 and 29, the market value of KOSPI evaporated by as much as 864 trillion won, briefly breaking the "cold winter" of the cryptocurrency market. On July 28, the trading volume of the five exchanges reached US$964.11 million, an increase of 82.5% from the average daily trading volume of the previous month. At that time, the stock market triggered a circuit breaker due to a decline of more than 10%. On July 29, Upbit's USDT transaction volume reached 200.045 billion won, about twice its Bitcoin transaction volume.

Why did exchanges turn to banks and brokerages?

Liquidity is concentrated on top exchanges due to shrinking trading volumes. Upbit's July transaction volume fell 10% to about 11.7 trillion won, but its market share climbed to 67.4% from 62.3%. At the same time, Bithumb's transaction volume fell 26.6% to 4.7 trillion won, and its share slipped to 27.1%, widening the gap to 40.3 percentage points.

It was reported that the combined share of Upbit and Bithumb exceeded 90% in early July. The Kaiko South Korea Market Report written by Presto Labs shows that the top two exchanges in history have handled nearly 96% of domestic trading volume. Upbit took advantage of its own advantages to waive handling fees for six stablecoins starting July 26, causing its USDT transaction volume to temporarily rise to nearly 160 billion won, about four times that of Bithumb.

Coinone is trying to expand beyond token trading, adding a stock trading tab to the main screen of its application and guiding users to a web platform for Korean investment securities. This is the first product since the broker took a stake in May. Korea Investment Securities and OKX Ventures each bought about 20% of the shares for about 80 billion won. The 160 billion won deal reduced founder Cha Ming-hoon's shareholding to 30.4%.

Future Asset Consulting acquired a 97.15% stake in Korbit, and the South Korean Fair Trading Commission approved the deal, in part because Korbit's market share was only about 0.5%. Korbit plans to relaunch under the DigitalX brand and expand into stablecoins, real-world assets, tokenized securities and custody businesses, targeting corporate and institutional customers rather than retail investors. The move comes after the company has been operating at a loss for eight consecutive years since 2018.

Has every exchange found an easy way out?

Unlike Korbit, Bithumb has negotiated partnerships or investments with Kiwoom Securities, Kakao, Toss and Meritz Securities, but failed to meet Bithumb's price, control and structure conditions. Any potential transactions are automatically complicated by the complex equity relationship between Bithumb Holdings, Bidet and T Scientific, in addition to unresolved matters, including administrative litigation with the Financial Intelligence Unit (FIU), penalties for misdelivery of bitcoins, and an ongoing virtual asset service provider (VASP) license update.

Gopax is the smallest exchange with a share of only about 0.1%, and its priority is recovery rather than growth. Streami appointed former AWS South Korean executive Kim Na-young as CEO to prioritize GoFi-a suspended deposit product that lost nearly 100 billion won after the FTX collapse in 2022. Binance has paid approximately US$70 million as of September 2023, but has not paid any more since. Regulators insist that Gopax must pay back the amount in full before it can be renewed with its VASP license. The exchange has increased the Korean won deposit rate from 1.30% to 1.50%, but it is still below Upbit's 2.1% and Bithumb's 2.2%.