South Korea’s Crypto Trading Landscape: A Shift to Overseas Markets
In the ever-evolving cryptocurrency sector, South Korea is witnessing a significant transition as domestic exchanges face a substantial downturn in fiat deposits and trading activity. According to industry reports, even as the number of crypto users increases, the capital held in South Korean won and the size of local markets are dwindling. This trend indicates a growing movement of funds towards international trading platforms.
Accelerating Capital Flight to Foreign Exchanges
Recent data from Fnnews highlights a significant decrease in KRW deposits on local exchanges, falling by 42% to approximately ₩6.2 trillion compared to the previous year-end. Concurrently, the daily average trading volume has decreased by 12%, now standing at ₩6.4 trillion. The domestic cryptocurrency market capitalization has also suffered a 14% reduction, while the global market cap experienced a smaller decline of about 7%.
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Additionally, the outflow of cryptocurrency has reached a staggering ₩101.6 trillion, with ₩78.9 trillion being redirected to registered foreign operators. This channel of capital flow to foreign markets has seen a 4% increase, suggesting that substantial sums are migrating away from South Korean trading venues.
Challenges Facing ‘Kimchi Coins’
Reports indicate that South Korean exchanges are becoming more selective about the tokens they list. Currently, there are 653 unique crypto assets listed domestically, an increase of 55. However, many of these assets are traded on only one platform. Among these, 279 are single-listing assets, and approximately 43% have market capitalizations of ₩100 million or less. This level of concentration subjects smaller tokens to significant price volatility and poses a risk of delisting if liquidity diminishes or if regulatory bodies demand enhanced transparency.
Rising User Base, But Smaller Transactions
The number of user accounts has grown to around 10.77 million, marking an 11% increase since the previous year-end. Despite this growth, the average capital per user appears to have decreased, reflected in the reduction of KRW deposits and daily trading volumes.
The total crypto market capitalization is currently valued at $3.94 trillion. However, average losses from peak prices have intensified, with the mean maximum drawdown climbing to around 72% from a previous 68%. In essence, while more individuals are creating accounts, less capital remains on local platforms, increasing the risk for smaller investors.
Regulatory and Banking Challenges Impacting the Market
Stringent regulations and tougher banking partnerships are influencing South Korea’s crypto landscape. Some exchanges are struggling to maintain real-name bank accounts or to comply with new oversight requirements. When domestic fiat on-ramps are weak, traders are more inclined to seek overseas platforms that offer a wider range of tokens and deeper liquidity pools. This scenario encourages both traders and crypto projects to explore opportunities beyond the local market.
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