Special Report on the Korean Crypto Market: Digital Subcontinent under Kimchi Premium

As the global crypto market's heat tends to stabilize, South Korea continues to showcase an "alternative prosperity" characterized by active trading and rising enthusiasm. Data shows that by the end of 2024, the total market capitalization of the South Korean crypto market will exceed $74.8 billion, with the five major domestic exchanges managing a combined $73 billion in assets; the daily average trading volume in December surged from $2.38 billion in October to $10.7 billion, surpassing the two major South Korean stock exchanges. It is expected that by 2030, the annual revenue of the South Korean crypto market will grow to $635.4 million, with a compound annual growth rate of 16.1%.

Currently, about 25 million South Koreans have opened accounts on crypto exchanges, accounting for nearly half of the total population. Even more noteworthy is South Korea's unique "Kimchi Premium" phenomenon, which reached 8.5% in March 2024 and peaked at 10% in November, far exceeding the global average, reflecting the high enthusiasm of local investors.

The massive flow of funds, extensive user base, and unique market price differential effects together shape the high activity and extraordinary heat of the Korean crypto market, resembling a "golden land" of the digital age in the global crypto landscape.

Analysis of the Reasons for the Hot Korean Crypto Market

economic reasons

1. Investment channels are restricted

South Korea's traditional investment channels are facing structural difficulties:

• Real Estate: In 2023, South Korea's economic growth rate is only 1.4%, with housing prices remaining high but transaction volumes declining. In 2024, transaction volumes in the capital region are expected to decrease by 7.5% year on year. The "three highs and one low" situation of high housing prices, high loan rates, high interest rates, and low transaction volumes is driving capital towards highly volatile encryption assets.

• Stock market: KOSPI fell 8.03% in 2024, significantly underperforming the Shanghai Composite Index and Nikkei 225. The South Korean market is experiencing a "lonely decline" situation, with investor confidence undermined.

2. Low interest rates and a loose monetary environment

The long-term loose monetary policy and low interest rate environment have prompted South Korean investors to turn to high-yield assets. Since the pandemic, the Bank of Korea's benchmark interest rate has remained at 3.5%, significantly lower than the Federal Reserve's level of over 5%, resulting in decreased savings attractiveness. Due to its high yield potential, low barriers to entry, and high liquidity, cryptocurrency has become the preferred allocation direction for risk-loving investors.

3. Expectations of Korean Won Depreciation

In recent years, the Korean won has continued to depreciate, with the exchange rate against the US dollar dropping to 1473.75 won in April 2025, the lowest level since 2009. The depreciation of the won, combined with high oil prices and rising supply chain costs, has increased domestic inflationary pressure. As an asset priced in US dollars, globally circulated, and decentralized, cryptocurrency has become a new path for investors to hedge against the depreciation of their local currency and seek asset preservation.

social psychological reasons

According to the theory proposed by economist Samuelson, "Happiness = Utility / Desire", when desires rise rapidly while the acquisition of utility is constrained, individual happiness will significantly decline.

• Long-term social class solidification, high competition pressure, and economic fluctuations have intensified wealth anxiety among young people, making "money" the dominant life goal. According to data from the Bank of Korea in 2024, 72.4% of respondents believe that "economic conditions" are the primary determinant of happiness.

• Under the difficulty of traditional paths to satisfy wealth desires, cryptocurrency is viewed as an investment choice for young people pursuing high utility and breaking class limitations.

• The consumption concepts of the young population in South Korea also show two typical differentiations: one is the "YOLO" group, which emphasizes enjoying the moment and high-risk preferences; the other is the "YONO" group, which tends to rational consumption and values asset accumulation. Despite differing consumption attitudes, both converge in their investment motivations for high-yield assets, as encryption currencies meet their common psychology of pursuing returns and wealth growth.

Why is Korea so prosperous, and not Japan?

1. Economic Perspective: The Korean Won is relatively weak, requiring alternative paths.

• The Japanese yen is considered a safe-haven currency due to its extremely low interest rates and large foreign exchange reserves. Even with fluctuations in the exchange rate, its financing advantages remain unchanged.
• The South Korean won market is small in scale, has weak liquidity, and fluctuates in the same direction as global risk sentiment. Its foreign exchange reserve position is relatively weak, with some capital controls, making it difficult to assume the same status as the Japanese yen.

Therefore, compared to Japanese investors, South Korean investors have a greater lack of long-term trust in domestic currency assets, and tend to seek assets that are not denominated in local currency and can circulate globally, which is highly aligned with the demand for encryption.

2. Economic Perspective: Traditional investment yields are lower, pursuing higher returns.

• Real Estate: South Korean investment accounts for over 50%, but the overall actual return rate is lower than Japan's, and there are more restrictions.
• Stock Market: In recent years, the South Korean stock market has consistently underperformed compared to Japan, especially with a noticeable gap in 2024.

3. Policy Perspective: South Korea's attitude is open, while Japan is conservative and restrictive.

The South Korean government has a relatively open attitude towards cryptocurrencies, while Japan's regulations are stricter and more conservative.

4. Cultural Perspective: South Korea pursues quick wealth, while Japan emphasizes steady accumulation.

• Japan: Values "small accumulation leads to large" and "prudent financial management". Emphasizes the values of restraint, accumulation, and patience.
• South Korea: Emphasizes "quick success" and "keeping up with trends", where people tend to pursue short-term high returns, eager to achieve rapid wealth through stock trading, cryptocurrency trading, and other means.

The prosperity of the Korean crypto market is essentially the optimal trade-off made by investors in terms of macroeconomics, traditional assets, government attitudes, and cultural thinking.

User Analysis of the South Korean Market

South Korean market user profile

1. Market and Account Types: Overall Rapid Growth

• Number of investors: As of January 2025, the number of registered individual investors at the top five exchanges reached about 25.25 million, an increase of 37.6% compared to three years ago.
• Actual number of users: As of February 2025, there are approximately 17.09 million active investors. The market is expected to heat up in 2024, resulting in a noticeable increase in activity.

2. Age and Gender: Significant growth in young users, with an increase in female participation.

• Users aged 30 to over 40 account for more than 50%
• Users under 20 years old account for 18.6%, showing strong growth momentum.
• The participation of middle-aged and elderly women has increased.

3. Age and Capital Scale: Intergenerational Stratification is Obvious

• Primarily small investors, most users hold less than 500,000 KRW, concentrated in the younger demographic.
• Older users aged 50 and above tend to make larger investments of over 50 million Korean Won.
• Investors aged 60 and above account for a small proportion, but the total amount of virtual assets held reaches 13.3795 trillion Korean Won.

The Korean crypto market presents a "dual structure": young people are the main contributors to user numbers and activity, while the middle-aged and elderly groups hold more assets and trading volumes.

( user habit phenomenon

1. User Asset Preference

• Bitcoin dominates the market: its trading volume accounts for as much as 37.2%
• XRP is highly attractive in South Korea: with a market cap of $588 million, it ranks second.
• High concentration of mainstream assets: The top ten virtual assets in the Korean market are basically consistent with the top ten globally.

2. User Overall Behavior Characteristics

• Trading platform preference is concentrated: UPbit occupies about 70% to 80% of the domestic market share.
• Trading configuration preferences concentrated: Enthusiastic about the exclusive listing of "Kimchi Coin" on the trading platform.

3. On-chain usage

• The Korean market's reliance on centralized exchanges )CEX( remains high: approximately 68.9% of trading volume is concentrated in CEX.
• Decentralized trading ) DEX ### is growing rapidly: In 2024, the DEX trading share rises from 8.57% to nearly 17%.

Overview of South Korea's Crypto Market Exchanges

The South Korean crypto market is dominated by five major spot exchanges: UPbit, Bithumb, Coinone, Korbit, and Gopax. Among them, UPbit and Bithumb account for over 98% of the total market share.

1. UPbit

Operated by Dunamu and supported by Kakao. After its establishment in 2017, it quickly developed into a market leader in South Korea, supporting direct KRW deposit transactions. Offers KRW/Bitcoin/USD trading pairs with ample liquidity.

2. Bithumb

Founded in 2014, it was once the leader in the South Korean market and is currently the second largest exchange. It plans to conduct an IPO in 2025.

3. Other Korean exchanges

• Coinone: Known for its extremely high security, it is the first exchange in South Korea to list Ethereum.
• Korbit: Established earliest, launched KRW Bitcoin trading in April 2013.

4. Overseas exchanges in South Korea

Overseas exchanges such as Binance, OKX, and KuCoin have attracted a large number of investors in South Korea. The main reasons include:

• "Kimchi Premium" arbitrage opportunity
• Provide a more diversified range of trading varieties, such as derivatives.
• Alternative options after the interruption of local exchange services

Overview of Investment Institutions and Market Makers in the South Korean Market

Characteristics of Korean crypto investment institutions:

• The types cover pure encryption VC, corporate venture capital, and multi-strategy hedge funds.
• Investment stages from seed round to growth stage, with a focus on DeFi, NFT, Web3 games, infrastructure, and AI.
• Regional layout, ecological construction, and project incubation each have their own characteristics.

Main investment institutions:

1. Hashed: Established in 2017, focusing on early Web3 project incubation in the Asian market.

2. Nonce Classic: Established in 2018, emphasizing team collaboration and information sharing.

3. Blocore: A venture capital firm under Gameberry, focusing on Web3 games and IP projects.

4. Samsung Next: Samsung Group's innovation investment department, covering diverse tracks such as Web3 infrastructure and AI hardware.

5. Tiger Research: Focus on on-chain data analysis and quantitative research

6. Klein Labs: A research-driven Web3 encryption service provider, offering customized liquidity management and full-stack growth solutions.

Star Projects in the South Korean Market

( underlying ecosystem

1. Kaia: Layer 1 jointly incubated by Kakao and Naver, focusing on distributed credentials and points system.

2. Story Protocol: positioning as a "programmable narrative engine", supporting IP creation and licensing on the blockchain.

3. Arbitrum: Establishing a local community "Arbitrum Korea" in collaboration with Delabs and Lotte Metaverse.

4. Aptos: Hosting a hackathon and developer salon with Supervillain Labs in Seoul

5. Monad: Release Korean documentation and SDK, launch the "Monad Analyst Certification" course

6. ICP: Establishing an official Hub in South Korea, the ecological project Piggycell connects to Korea's largest shared charging platform.

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) DeFi

1. Mitosis: Modular Multi-Chain Asset Management Protocol, Supports Cross-Chain Lending and Strategy Configuration

2. Keplr Wallet: A native wallet for Cosmos, widely used in the Korean community.

3. Exponents Fi: Focus on yield automation and risk management, with dynamic strategy adjustment capabilities.

4. Xangle: A leading provider of on-chain data services and solutions

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) GameFi

1. MapleStory N / Nexon