The world's most "crazy" leek, can Koreans迎来 a second spring after their dreams are shattered?

Author: Huo Huo, Plain Language Blockchain

According to data from The Block, in October, the cumulative trading volume of crypto CEX reached $443.27 billion, while South Korea's Upbit had a spot trading volume of $51.88 billion in October, ranking second.

South Korea's Upbit has risen to become the second-largest CEX, demonstrating the strong demand in the country's crypto market. In fact, looking at the data in recent years, the South Korean market has always been one of the most active forces in the crypto market. Despite the global economic downturn in 2022, its user base and trading volume continued to expand.

So how has South Korea's crypto market developed, and what is its current state?

The "Korean Dream" in "Kimchi Premium"

What comes to mind when you think of South Korea? Is it the thriving entertainment industry, advanced cosmetic surgery techniques, or the deliciously spicy kimchi?

However, now in addition to these well-known Korean labels, perhaps we should add another: the country of speculation.

In South Korea, Bitcoin has always been very popular, especially at the peak of the bull market in 2017, when Bitcoin became widely known among the public. From students to the elderly, from office workers to freelancers, South Koreans have been striving to find opportunities for market trading in hopes of getting rich. So much so that buyers on South Korean trading platforms were once willing to purchase Bitcoin at a 50% premium.

When local Bitcoin prices were 40% higher than those on U.S. exchanges, Coinmarketcap even removed South Korea's prices from cryptocurrency listings. This phenomenon later became known as the "Kimchi Premium."

In 2018, the South Korean government began cracking down on speculative behavior, mandating the use of real-name bank accounts for cryptocurrency trading, and later that year, it fully banned ICOs, leading to the disappearance of the Kimchi Premium.

Although the Kimchi Premium may have vanished, the crypto speculation craze continues.

In 2021, South Korea's total crypto trading volume reached nearly $20 billion, ranking fourth globally, behind the United States, Japan, and the United Kingdom.

In 2022, South Korea ranked third in Bitcoin trading volume, following the United States and Japan.

In the first half of 2023, South Korea's digital asset market also saw significant growth. According to a research report released by KOFIU on October 31, 2023, the crypto market capitalization increased by about 46% compared to the previous half, reaching 28.4 trillion won (approximately $22.6 billion).

So why are South Koreans so keen on speculating in Bitcoin?

On one hand, it relates to the country's longstanding national conditions. The fast-paced lifestyle in South Korea leads to a quicker acceptance of new technologies. The local support for the Web3 field, a strong economy, and a focus on technology and innovation are all contributing factors:

The Korean War from 1950 to 1953 left South Korea as one of the poorest countries in the world, but by 2023, it has become one of the wealthiest.

Led by family-owned conglomerates (known as chaebols), with an emphasis on exports and capitalist development, South Korea achieved an economic miracle in just a few decades, known as the "Miracle on the Han River." This rapid development has also resulted in a fast-paced lifestyle where every second counts, food must be delivered quickly, trains must arrive on time, and buildings are constructed within weeks. Whatever you do, do it quickly and efficiently, and getting rich is no exception. Therefore, South Koreans uphold the value of "fast, fast, fast" wealth accumulation and a speculative culture, eagerly hoping to get rich quickly through speculation.

Before 2012, the South Korean market primarily relied on innovation and surplus labor value for economic growth. However, after 2012, economic growth slowed from double-digit growth in 2000 to about 3%, making it increasingly difficult to get rich. The upward mobility for ordinary people became narrower, with strict real estate policies and high stock market thresholds, leaving many South Koreans with only gambling as a means of speculation.

When crypto assets emerged, South Koreans felt that a new gambling product had appeared, bringing new opportunities for wealth.

On the other hand, South Korea is a country that welcomes cryptocurrencies with open arms, having once implemented relatively lenient policies in the crypto market. Currently, South Korea can be considered one of the most crypto-friendly countries.

However, the collapse of the LUNA project in 2022 caused significant losses for South Korean investors, who not only failed to make money but also faced debts, shattering many people's "Korean Dream." Meanwhile, the LUNA crash also drew significant attention from the South Korean government, which began tightening regulations on crypto.

In the first half of 2023, the South Korean market recorded trading of approximately 622 different cryptocurrencies, including market leaders like Bitcoin, Ethereum, Ripple, and Dogecoin. During this period, a total of 169 new cryptocurrencies were listed, with 115 facing trading suspensions due to project risks and investor protection issues.

South Koreans Expecting Overnight Wealth

Despite the enormous risks associated with crypto, they do not deter South Koreans from their enthusiasm for speculative wealth.

During the pandemic, many young South Koreans even quit their jobs at large companies to speculate in Bitcoin, hoping to change their life trajectories.

Research from a crypto platform indicated that in the first half of 2023, about 26% of South Korean adults participated in the cryptocurrency field, with increasing participation from women and the younger generation. Among them, 25% of crypto investors made their first crypto investment in the past six months, and 38% of young crypto investors hope to get rich overnight through crypto assets.

Following this narrative logic, the most active participants in the DeFi space should be South Koreans. However, after the Kimchi Premium, while the speculation craze still exists, there has been no progress in DeFi development.

This is still related to South Korea's national conditions.

First, South Korea's financial regulatory environment is relatively unstable. Although financial regulatory agencies have taken some measures in the past to regulate the cryptocurrency market, including DeFi, these policies have not been incorporated into legislation, leading to uncertainty that can hinder some DeFi projects and investors.

Additionally, the South Korean government emphasizes KYC (Know Your Customer) and AML (Anti-Money Laundering) requirements, which may impact the anonymity and decentralization characteristics of DeFi platforms. These requirements increase the difficulty of promoting and developing DeFi projects in South Korea.

Moreover, South Korea has a strong traditional financial system, including banks and securities companies. This makes South Koreans more inclined to use traditional financial tools rather than DeFi. Cryptocurrencies and DeFi are still relatively novel and may require more time to integrate into South Korea's financial culture.

Finally, education and awareness are also challenges. DeFi has a high threshold for ordinary investors, and its returns do not provide sufficient gambling stimulation. Therefore, unlike the Western ideal of Bitcoin as "digital gold," South Koreans place more emphasis on the speculative attributes of cryptocurrencies. This is similar to the common practices in the South Korean stock market, where crypto opens up new possibilities.

According to the Digital 2022 Global Overview Report, in 2022, the number of cryptocurrency investors in South Korea accounted for over 13% of the population, approximately 6 million people. The activities of these investors primarily revolve around CEX, which gives CEX a significant influence in the South Korean crypto market.

Global distribution map of countries with cryptocurrency ownership

So what are some well-known platforms and projects in South Korea?

Mainstream Platforms Focusing on "Kimchi Coins"

During the cryptocurrency boom in 2017, South Korea became a popular trading hub for Bitcoin and other virtual currencies, even contributing a significant portion of the global market share at certain times. However, a series of security breaches and hacking incidents in 2018 affected several South Korean platforms, such as Bithumb, Coinrail, and Youbit. Youbit even lost 17% of its assets in a second hacking attack and was ultimately forced to file for bankruptcy.

These incidents also caused significant losses for related investors, but despite this, Upbit has risen to become the second-largest platform globally, indicating that South Korea's crypto trading volume remains considerable. Currently, the mainstream platforms in the South Korean crypto market, besides Upbit, include Bithumb, Coinone, and Korbit, but Upbit is far ahead, accounting for nearly 80% of the cryptocurrency trading market in South Korea.

Bithumb, as the second-largest participant in the market, maintains a strong position, accounting for 15% to 20% of the total trading volume among the four major exchanges, while Coinone's market share is between 3% and 5%, and Korbit's share is less than 1%.

Related analyses show that South Korean traders have a high-risk appetite, and compared to the global market, the trading volume of Bitcoin and Ethereum is relatively low. In contrast, altcoins like Loom Network, eCash, and Flow occupy a significant portion of the trading.

Among Upbit's user base, most individual investors also prefer high-profit altcoins due to their higher risks, which is the main reason for the popularity of altcoin trading in the South Korean cryptocurrency market.

Popular cryptocurrencies in the South Korean market include Steem Dollars, MossCoin, Hippocrat, and Aha Token, but these crypto assets are primarily traded on Upbit and are referred to as "Kimchi Coins." These tokens are mainly traded by South Korean investors and have formed their own market on the Upbit platform, as they have not received much attention in the global market.

Therefore, on Upbit, the performance of mainstream tokens is relatively poor, such as Bitcoin (BTC), Ethereum (ETH), and Polygon (MATIC), which have significant trading volumes globally. However, within Upbit, their trading volumes are relatively low, with only 2% of the trading volume coming from ETH and only 9% from BTC.

From a global market perspective, Upbit has consistently ranked second this year.

This phenomenon indicates that Upbit has unique characteristics compared to the global market and reflects the differences in investor preferences and investment strategies across regions. It is also worth noting that Upbit received approval from Singapore's regulatory authorities last month, paving the way for future developments in Singapore.

Conclusion

Many young people hope to get rich through "speculating in Bitcoin," escaping economic pressure and achieving social mobility. However, like any emerging industry, the involvement of significant economic interests and the lack of synchronized regulatory norms have led to numerous issues.

Although various forms of token issuance have been banned in South Korea since 2017, the government has also established regulations against related illegal activities. However, these are not legislative measures at the congressional level but rather regulations issued by government agencies or departments, and regulatory legislation has yet to emerge.

Since 2022, perhaps influenced by numerous explosive incidents, especially the collapse of Terra and the FTX crash, South Korea has begun to adopt more intensive crypto regulatory measures. Last year, South Korea started drafting the "Basic Law on Digital Assets," hoping to strengthen regulation of its domestic cryptocurrency market and plans to introduce a CEX system to eliminate illegal platforms, further optimizing regulations to support sustainable development.

Additionally, with the election of the new "crypto-friendly president" Yoon Suk-yeol in May 2022, who promised to relax crypto regulations, the market is moving towards significant legalization.

Overall, as the fourth-largest economy in Asia, South Korea is one of the most active countries in the cryptocurrency market and has become an indispensable part of the crypto ecosystem. As the process of legalizing crypto activities continues, will those South Koreans hoping to get rich through "speculating in Bitcoin" be able to achieve their dreams?