A cooler-than-expected US Consumer Price Index (CPI) report for April provided a major boost to Bitcoin this week, while data from South Korea revealed unprecedented levels of cryptocurrency engagement among its population.
On Wednesday, Bitcoin’s price surged over 7% to $66,124.59, marking its best single-day performance since March 25. This upward movement also pushed the price back above its 50-day moving average for the first time since April 13. The broader crypto market often reacts positively to signs of easing inflation, which can influence expectations around future monetary policy and interest rates.
Long before the global crypto rally sent prices to new all-time highs earlier in 2024, South Korea had already established itself as a hotspot for retail crypto trading. A semi-annual report from Korea Financial Intelligence Unit (KOFIU) showed that by the end of 2023, the number of active users on registered Korean exchanges had grown by 390,000, reaching a total of 6.45 million. This represents over 10% of the country’s total population.
Of these users, 99% are individual investors, with nearly 60% falling between the ages of 30 and 40. During this period, the country’s average daily cryptocurrency trading volume grew by 24% to 3.6 trillion won (approximately $26 billion). Meanwhile, the total value of cryptocurrencies held on registered exchanges surged by 53%, reaching 43.6 trillion won.
South Korea's Resilient Crypto Adoption
Remarkably, the nation’s fervor for digital assets did not wane following the 2022 collapse of TerraUSD, a stablecoin created by South Korean developer Do Kwon. The event, which wiped out billions in market value, appears to have been a learning experience rather than a deterrent. In a sign of continued mainstream political acceptance, a major political party even promised in last month’s parliamentary elections to allow South Koreans access to US spot Bitcoin ETFs.
The first quarter of 2024 saw the Korean Won surpass the US Dollar to become the single largest currency by global crypto asset trading volume. Upbit, the country’s dominant exchange, frequently ranks among the top five exchanges globally by volume. KOFIU noted that rising cryptocurrency prices and a recovery in investor sentiment led to increases in trading volume, market capitalization, exchange revenue, and Korean Won deposits, with user numbers also rebounding strongly.
New Regulations and Market Consolidation
In response to this growing market, South Korea will implement the Virtual Asset User Protection Act starting in July. This legislation imposes stricter requirements on exchanges and enforces stronger penalties for misconduct. While designed to protect investors, the new law may have the unintended consequence of further solidifying Upbit’s commanding position in the Korean market.
Upbit currently handles over 80% of the total trading volume in South Korea, a level of domestic dominance unmatched by any other exchange globally. Last year, Upbit’s customers accounted for almost one-fifth of the total deposits at its main banking partner.
Simon Seojoon Kim, CEO of South Korean venture capital firm Hashed, noted that the cost of complying with the new regulatory requirements will be significant. "For well-resourced exchanges like Upbit, meeting the new standards will be easier," he explained. "Smaller exchanges, however, face much greater challenges."
This regulatory pressure is already having an effect. Even global exchanges like Crypto.com have faced hurdles entering the Korean market, with their planned launch delayed due to the need for additional communication with regulators. Reports indicated that financial intelligence officials had identified concerning issues in anti-money laundering documentation submitted by the exchange.
Upbit's Rise to Dominance
Operated by fintech company Dunamu Inc., Upbit has captured nearly 5% of global cryptocurrency trading volume since its launch in 2017. The exchange was founded by former executives of mobile payment company Danal—Song Chi-hyung and Kim Hyoung-nyon—and received backing from Korean internet giant Kakao Corp.
Upbit gained an early advantage through its integration with KakaoTalk, South Korea’s ubiquitous messaging platform. This partnership allowed traders to synchronize their KakaoTalk and Upbit accounts, creating a seamless onboarding experience that contributed significantly to its rapid adoption.
Despite the challenges of increasing regulation and market volatility, South Korea's cryptocurrency ecosystem remains exceptionally vibrant, continuing to attract attention from exchanges and investors worldwide. For those looking to understand these global market dynamics, comprehensive resources are available to 👉 track real-time cryptocurrency trends.
Frequently Asked Questions
What caused Bitcoin's price surge?
Bitcoin's price increased over 7% following the release of US inflation data that showed cooling consumer prices. This development led to renewed investor optimism about potential future monetary policy adjustments.
How popular is cryptocurrency trading in South Korea?
Extremely popular. Active users on registered Korean exchanges reached 6.45 million by end of 2023, representing over 10% of the country's population. The Korean Won has even become the largest currency by global crypto trading volume.
What is South Korea's new Virtual Asset User Protection Act?
This is new legislation taking effect in July 2024 that imposes stricter requirements on cryptocurrency exchanges operating in South Korea. It increases penalties for misconduct and aims to provide better protection for investors in the digital asset market.
Why is Upbit so dominant in South Korea?
Upbit handles over 80% of domestic trading volume thanks to its early integration with KakaoTalk (South Korea's popular messaging app), which made onboarding seamless. Its strong banking relationships and compliance resources position it well for new regulations.
How did the TerraUSD collapse affect South Korean crypto investors?
Despite the significant losses from the TerraUSD project (created by a South Korean developer), retail investment in cryptocurrency continued to grow in the country. The event appears to have served as a learning experience rather than deterring participation.
Are global exchanges able to enter the South Korean market?
Entry has become more challenging due to increasing regulatory requirements. Some global exchanges like Crypto.com have delayed their launches to address regulatory concerns, particularly around anti-money laundering compliance.