By Tom Blitzer
Key Insights:
- Korean Won leads crypto trade volumes, outpacing the US Dollar with over $456 billion in Q1 2024, highlighting Korea’s crypto market dynamism.
- Fee wars among South Korean exchanges catalyze trading surge, with Upbit dominating despite rivals’ zero-fee campaigns shaking the market landscape.
- Regulatory efforts aim to ensure market integrity amid the crypto trading boom in Korea, as political and economic factors fuel industry growth.
The South Korean won rose to become the most traded fiat currency against cryptocurrencies in the first quarter of 2024. Surpassing the previously dominant U.S. dollar, the won recorded over $456 billion in trading volume on centralized crypto exchanges. This milestone was detailed in an April 15 research report by Kaiko, which also shed light on the factors contributing to the won’s rising prominence in the global cryptocurrency landscape.
The transition to the forefront of crypto trading volume underscores the dynamic nature of the market and indicates a significant pivot in investors’ trading preferences and strategies. The report by Kaiko not only outlines the statistical lead the Korean won has taken but also explores the underlying causes of this shift, notably attributing it to competitive practices among South Korean exchanges.
The Catalysts Behind the Won’s Ascendancy
Kaiko’s analysis attributes the Korean won’s surge in crypto trading volume to a combination of macroeconomic factors and competitive dynamics within South Korea’s cryptocurrency exchange market.
The report highlights that the fierce “fee war” among Korean crypto exchanges played a crucial role in boosting trade volumes, particularly noting that the competition has reached its most intense levels in over two years by early March 2024.
Moreover, the broader improvement of the macroeconomic environment has also been a factor contributing to this trend. The competition among exchanges, primarily driven by efforts to attract users through lower fees, has significantly impacted trading volumes, propelling the won to overtake the U.S. dollar in cumulative trade volume for the first quarter of the year.
Exchange Dynamics and Market Responses
Within the South Korean cryptocurrency exchange ecosystem, Upbit has maintained its position as the leading platform, commanding over 82% of the country’s crypto market share since 2021. However, the landscape began to shift with the onset of a recent bull run in the cryptocurrency market, which intensified competition among exchanges. Rivals such as Bithumb and Korbit initiated zero-fee trading campaigns, aiming to disrupt Upbit’s market dominance and capture a larger share of the trading volume.
Despite these efforts, Bithumb experienced a significant drop in revenue, a consequence of its zero-fee strategy that, while increasing trade volume, ultimately led to a 60% decrease in annual revenue for 2023. This development prompted a reevaluation of the zero-fee campaign, with Bithumb discontinuing the approach in early February 2024 after just five months. The report further suggests that trade volumes for the Korean won showed a decline in early April but are expected to rebound, particularly with the anticipated approval of spot Bitcoin and Ether exchange-traded funds (ETFs) in Hong Kong.
Regulatory Environment and Future Outlook
The increasing prominence of South Korea’s won in cryptocurrency trading comes amid a broader regulatory and competitive context. South Korea has emerged as a significant hub for cryptocurrency activity, attracting attention from both traders and political figures, especially in the lead-up to the parliamentary election. Political parties are actively engaging with crypto-friendly policies to appeal to voters, demonstrating the growing influence of the cryptocurrency market in the country’s economic and political discourse.
Regulatory bodies in South Korea are also taking steps to ensure a secure and transparent trading environment. Amid the trading frenzy, efforts are being made to crack down on dubious tokens and enforce stricter listing rules to protect investors. These measures, coupled with the dynamic exchange competition and the evolving macroeconomic landscape, suggest a robust and multifaceted future for cryptocurrency trading in South Korea.