The South Korean Central Bank's latest Financial Stability Report shows that Korean crypto investors have shifted from aggressive accumulation to strategic profit-taking. This change raises questions about the impact it will have on global market dynamics.
This situation indicates that, even though Bitcoin has surpassed the $100,000 level this year, Korean investors are opting for profit sales instead of increasing their positions.
Korea's High Trading Volume is Giving Cooling Signals
South Korea has long held a significant influence over the global cryptocurrency market relative to its weight. Despite constituting a small portion of the world population, Korean won (KRW) trading pairs consistently rank among the top two fiat currencies globally in terms of volume and can even surpass the US dollar during peak periods.
However, the report from the Bank of Korea (BOK) indicates a significant change in investor behavior. Although the cryptocurrency transaction turnover rate in Korea is 156.8%, which is considerably above the global average (111.6%), the nature of these transactions is changing. Korean individual investors now prefer to take profits instead of chasing price increases in the 2025 bull market.
In the report from the Bank of Korea, it is stated, 'The primary reason for the high turnover rates in the local cryptocurrency market is that the majority of participants are individual investors aiming for short-term gains through buying and selling.'
Concentration Risks and Market Structure Concerns
The report highlights a remarkable concentration in the market: According to data from the Financial Supervisory Service, from June 2024 to June 2025, 91.2% of the total trading volume belongs to the largest 10% of investor groups. The ability of such a small group to influence the market raises concerns about price manipulation.
The unique regulatory environment in Korea largely hinders companies' effective participation and prohibits foreign investors from trading on the local cryptocurrency exchange. As a result, the market is almost entirely shaped by individual traders. The absence of professional market makers brings about liquidity issues: The increase in Tether’s volume on Bithumb during the market decline in October, where it rose fivefold, stands as a clear example of this situation.
Global Ripple Effect
When Korean traders pull back, global markets feel it immediately. Historical data shows that during the bull runs of 2017 and 2021, Korean exchanges like Upbit and Bithumb ranked at the top of global volume charts. The frequently mentioned 'Kimchi Premium' (the phenomenon of prices being higher on Korean exchanges than the global average) has almost become a barometer of individual investor enthusiasm.
The current change based on profit-taking may have influenced the more measured progress of the 2025 rally compared to previous cycles. As Korean individual investors no longer provide aggressive buying support, a significant source of demand in global order books is decreasing.
This change is certainly not happening spontaneously. The previous report from the Bank of Korea indicates that the main reason for the slowdown in the local crypto market is the vibrant stock market. The KOSPI index has risen more than 70% since the beginning of the year, becoming the best-performing index in the world, led by AI stocks like Samsung Electronics and SK Hynix.
The daily trading volume on Korean cryptocurrency platforms has dropped by over 80% compared to the 2024 peak. Investors are shifting their capital to stocks and US leveraged ETFs. Analyst AB Kuai Dong summarized this: 'Where have Korean individual investors in the crypto market gone? The answer: Right next door to the stock market.'
Different Paths in Korean and Global Institutional Adoption
Compared to global market trends, the picture is quite different. The Korean market still relies on individual investors, while international markets have seen rapid institutionalization since the SEC’s approval of spot Bitcoin ETFs in January 2024. These products have attracted over ninety-four billion dollars in net inflows; BlackRock's IBIT alone has reached over fifty billion dollars in managed assets.
The central bank's report draws attention to this divergence: Global cryptocurrency markets have begun to show increasing correlation with traditional stocks, especially during periods of macroeconomic stress or changes in monetary policy. The correlation of Bitcoin with the S&P 500 has notably increased since 2020, especially with the rise of institutional participation, corporate treasury practices, and the proliferation of ETFs.
Conversely, the Korean market remains relatively isolated from these global dynamics. The central bank attributes this to the density of individual investors, liquidity issues, and capital controls that limit arbitrage opportunities.
Next Step: Institutionalization on the Horizon
The report suggests that Korea's unique market structure may begin to diminish alongside regulatory reforms. Since June, the government has allowed non-profit organizations to sell crypto assets, and then granted trial trading rights for professional investors. Discussions regarding the approval of a spot Bitcoin ETF are also ongoing.
The BOK anticipates that facilitating the participation of financial institutions and foreign investors will create the right market-making mechanism and alleviate liquidity issues. Increasing institutional participation may gradually reduce trading volume volatility and lower turnover rates.
However, the central bank also points out potential risks. The report states, 'When companies and foreign investors with information and capital advantages enter the market, local cryptocurrency prices may become more sensitive to supply-demand fluctuations,' emphasizing the need for careful monitoring during this transition process.
Conclusion
Korea's cryptocurrency market has entered a critical juncture. The transition from aggressive buying to profit-taking may signal maturation among the investor base but also eliminates a significant source of global market dynamism. As institutional frameworks develop and regulatory barriers are lifted, Korea's influence in the global cryptocurrency market could shift from crude individual volume to a more refined capital flow.
For now, it seems the days when Korean individual traders solely ignited global rallies are behind us. This significant change could fundamentally transform market sentiment cycles.
