South Korea has long been a breeding ground for cryptocurrency innovation and adoption. The country boasts one platform at the forefront of this digital asset surge: Upbit. The largest cryptocurrency exchange in South Korea has seen a 75% decline in daily trading volume from its peak this year, suggesting that the frenzy surrounding trading alternative cryptocurrencies, or altcoins, has subsided and that digital assets other than the market leaders bitcoin (BTC) and ether (ETH) may find it difficult to hold onto their high valuations.
Upbit, which provides 309 trading pairs and covers 192 cryptocurrencies, only recorded $3.79 billion in activity on the last day. According to TradingView data, that is a decrease from the $15 billion peak reached on March 5, when the entire market capitalization of altcoins reached a two-year high of $788 billion. Since then, the market cap has remained stable at roughly $750 billion.
Under the Virtual Asset User Protection Act, the new scheduled legislation will go into force in July and place stringent limitations on cryptocurrency exchanges. These steps include enhanced reserves, improved investor protection, and transaction monitoring. A representative for Bithumb, the second-biggest trading platform in Korea, NamhirJoon, outlines the difficulties this new legal environment presents, including the significant labor and capital requirements.
The CEO of Hashed, a venture capital business with headquarters in Korea, Simon Seojoon Kim, emphasized that upbeat-like exchanges with ample resources will find it more straightforward to comply with these new requirements, which may cause a divide between market giants and smaller rivals.
These regulatory obstacles have impacted international exchanges hoping to get into the Korean market. A delay in launching in South Korea was recently attributed to the need for additional communication with regulators.
Upbit has become a top-five global exchange by trading volume, fueled by a booming domestic crypto market.
- Market Share Mammoth: Upbit captures over 80% of South Korea’s cryptocurrency trading volume. This singular dominance within a significant crypto market like Korea has propelled them to the global stage.
- Accessibility Advantage: Upbit prides itself on a user-friendly interface and streamlined onboarding process. This focus on ease of use makes it attractive to both seasoned traders and crypto-curious newcomers in Korea.
Korean Crypto Frenzy
South Korea’s crypto enthusiasm isn’t a recent phenomenon. The country has consistently ranked high in global crypto adoption rates. This can be partially explained by:
- Investment Avenue: With traditional investment opportunities offering lower returns, many Koreans see cryptocurrencies as a potential path to higher yields.
- Regulatory Tailwinds: The South Korean government, while cautious, has taken a generally supportive stance towards cryptocurrencies. This fosters an environment where exchanges like Upbit can operate with a degree of regulatory clarity.
Upbit’s Global Ambitions
While Upbit reigns supreme in Korea, questions linger regarding its global aspirations. Here’s what we might see in the future:
- Compliance Conundrum: Expanding to new markets will necessitate navigating a complex web of international cryptocurrency regulations. Upbit will need to adapt its approach to comply with local requirements.
- Competition Crucible: The global cryptocurrency exchange landscape is fiercely competitive. Upbit must contend with established giants like Binance and Coinbase to carve out a niche in the international market.
- As of the time of writing, just over 9% of the $3.8 billion 24-hour trading volume was made up of bitcoin-Korean won and ether-won trading pairs. The remaining amount originated from trading pairings between altcoins and fiat currency.
