Introduction
South Korea's cryptocurrency market presents unique characteristics worth exploring, particularly regarding centralized exchanges (CEXs). According to the Korean Financial Intelligence Unit (KoFIU), approximately 6 million South Koreans—over 10% of the population—engaged in crypto investments during the first half of 2023. This analysis focuses on four major exchanges: Upbit, Bithumb, Coinone, and Korbit, leveraging data from mid-October 2023.
Key Trends in South Korean CEXs
1. Trading Volume Dynamics
- Global Decline, Relative Growth: While global CEX trading volumes peaked in March 2023 and declined thereafter, South Korean exchanges showed resilience. By September, their combined volume reached 16% of Binance’s trading activity, up from 7% in March.
- Outperforming Coinbase: South Korean exchanges consistently surpassed Coinbase in trading volume, highlighting their regional dominance.
2. Upbit’s Market Dominance
- 80% Market Share: Upbit maintained an 80% market share among Korean exchanges, with monthly volumes peaking at $36 billion in February.
Competitor Benchmarks:
- Bithumb: 15–20% share
- Coinone: 3–5%
- Korbit: <1%
👉 Discover how Upbit compares to global exchanges
Investor Behavior Insights
1. Reaction to Ripple’s Legal Victory
- XRP-Driven Surge: Following Ripple’s partial legal win against the SEC in July, XRP trading spiked by 80%, boosting South Korean exchange volumes by 37% month-over-month.
2. Bithumb’s Zero-Fee Experiment
- Short-Term Gains: Bithumb’s October 2023 zero-fee policy initially increased its market share to 20%, but the effect faded within weeks.
- Sustainability Concerns: Critics question long-term viability without fee-based revenue.
3. Coinbase vs. Upbit: Risk Appetite
- Upbit’s Retail Focus: Korean traders favor high-risk altcoins, with BTC/ETH comprising a smaller share (vs. Coinbase’s 85% institutional-driven volume).
- "Kimchi Coins": Tokens like $LOOM** and **$XEC saw 62% and 55% of their global volume originate from Korea, respectively.
Unique Market Characteristics
1. Altcoin Frenzies
- $LOOM’s Volatility: Prices surged 10x in October before crashing by 80%, reflecting speculative trading patterns.
- "Gaduri Effect": Policy changes (e.g., paused withdrawals) artificially inflated prices for assets like $FLOW.
2. Network Preferences
- Tron Dominance: Upbit users conducted 5x more transactions on Tron vs. Ethereum due to lower fees and faster speeds.
- Stablecoin Usage: Tron-based USDT transfers dominate for cross-exchange arbitrage.
FAQs
1. Why do Korean exchanges outperform Coinbase?
Korean retail investors drive higher altcoin volumes, whereas Coinbase caters to institutional BTC/ETH trading.
2. Is Bithumb’s zero-fee model sustainable?
Unlikely. The policy lacks long-term revenue streams and failed to retain market gains.
3. What are "Kimchi Coins"?
Altcoins like $UPP** or **$AHT traded almost exclusively on Korean exchanges, often ignored globally.
4. Why prefer Tron over Ethereum for transfers?
Lower fees and faster settlements make Tron ideal for moving funds between exchanges.
👉 Explore crypto trading strategies for volatile markets
Conclusion
South Korea’s crypto landscape thrives on retail-driven altcoin trading and unique exchange policies. While Upbit leads with monopolistic control, speculative assets like $LOOM and network preferences (e.g., Tron) reveal deeper regional idiosyncrasies. For global projects, tailoring strategies to Korean investor behavior—high-risk tolerance and policy sensitivity—is critical for success.