South Korea's smaller crypto exchanges chase finance deals as volume halves

After first-half trading turnover fell 54.6% from a year earlier, South Korea’s five won-based crypto exchanges are rebuilding their businesses around bank and brokerage partnerships, institutional services and regulatory cleanup.

Due to trading volume being down by 55%, exchanges are changing their business models to survive. 

What is happening to South Korea’s crypto market? 

The combined first-half turnover at Upbit, Bithumb, Coinone, Korbit and Gopax reached $366.58 billion, representing a 54.6% drop year over year. The five companies reached a cumulative volume of roughly 17.3 trillion won from July 1 to 27. This represents a 16.9% drop from the same stretch a month earlier.

The market has been shrinking against local stocks for months. In July, the five exchanges averaged 597.8 billion won ($406.5 million) in daily turnover, equal to just 1.59% of the KOSPI stock market’s daily average. That ratio was above 11% in January before falling to around 6% in March and April and about 2% in May. 

For comparison, domestic crypto volume reportedly hit as high as 21 trillion won in a single day in November 2024, when traders bet on crypto-friendly policy from a second Trump administration.

Notably, Bitcoin’s average daily move ran 1.25% in the first half and altcoins 1.79%, both below the KOSPI’s 4.67%, with Bitcoin stuck between $60,000 and $63,000. Some retail investors have shifted funds to the stock market to chase the rising KOSPI index.

Korbit sold 15 BTC and 60 ETH over ten days to raise roughly $11.6 million (1.6 billion KRW) in cash. Dunamu (operator of Upbit) saw its first-quarter revenue and operating profit decline by 55% and 78% year-over-year, respectively.

A director at Tiger Research referred to the current situation as “second crypto winter,” considering the sharp contraction in total crypto market cap and the fact that no new projects are emerging.

However, the winter lifted for 48 hours when the KOSPI shed as much as 864 trillion won in market value on July 28 and 29. The five exchanges traded $964.11 million on July 28, up 82.5% from the prior month’s daily average, as a circuit breaker halted a stock drop of more than 10%. Upbit’s USDT turnover hit 200.045 billion won on July 29, roughly double its Bitcoin volume.

Why are exchanges turning to banks and brokerages?

Due to the thinner volume, liquidity was pushed towards the largest exchanges. Upbit’s July turnover fell by 10% to about 11.7 trillion won, yet its market share climbed from 62.3% to 67.4%. Meanwhile, Bithumb dropped by 26.6% to 4.7 trillion won and saw its share slip to 27.1%, leaving a 40.3-percentage-point gap between the two.

Upbit and Bithumb’s combined share was reportedly above 90% in early July, and a Kaiko report on the Korean market, written by Presto Labs, found the top two handling nearly 96% of domestic volume historically. 

Upbit capitalized on its advantage by waiving fees on six stablecoins from July 26, briefly lifting its USDT turnover to nearly 160 billion won, roughly four times Bithumb’s.

Coinone is attempting to expand beyond token trading by adding a stock-trading tab to its app Home Screen that routes users to Korea Investment & Securities’ web platform, the first product since the brokerage took a stake in May. Korea Investment & Securities and OKX Ventures each paid about 80 billion won for roughly 20% holding, a 160-billion-won deal that left founder Cha Myung-hoon’s side with 30.4%.

Mirae Asset Consulting bought 97.15% of Korbit, a deal the Fair Trade Commission cleared partly because Korbit’s market share sits near 0.5%. Korbit plans to relaunch as DigitalX and expand into stablecoins, real-world assets, tokenized securities and custody, aiming at corporate and institutional clients rather than retail traders. 

The move follows eight straight years of operating losses since 2018.

Did every exchange find easy solutions? 

Unlike Korbit, Bithumb held talks with Kiwoom Securities, Kakao, Toss and Meritz Securities about cooperation or investment, but none could satisfy Bithumb’s terms regarding price, control and structure. 

Any potential deal is automatically complicated by the tangled ownership web between Bithumb Holdings, Bidet and T Scientific, unresolved items including an FIU administrative lawsuit, a Bitcoin misdelivery sanction and a pending VASP renewal. 

Gopax, the smallest at about 0.1% share, put recovery ahead of growth. Streami named former AWS Korea executive Kim Na-young as chief and prioritized resolving GoFi, a suspended deposit product with losses approaching 100 billion won after FTX collapsed in 2022. 

Binance paid out about $70 million through September 2023, but nothing has been paid since. Regulators insist the repayment must be made in full before Gopax can receive its VASP renewal. The exchange raised its won deposit rate from 1.30% to 1.50%, and it’s still under Upbit’s 2.1% and Bithumb’s 2.2%.

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