According to the latest financial stability report from the Bank of Korea, domestic cryptocurrency investors have shifted their behavior from aggressive buying to strategic profit realization, raising new questions about the impact on the global market.
This means that despite Bitcoin surpassing $100,000 this year, domestic investors have opted for profit realization rather than increasing their investments.
Korea, a signal to cool overheated trading
Korea has consistently exerted influence in the global cryptocurrency market. Although it represents only a small portion of the world population, the Korean won (KRW) trading pairs have continually ranked among the top two fiat currencies in terms of trading volume. At times, it records levels that surpass or match the US dollar.
However, the Bank of Korea's report suggests that there is a distinct change in investor behavior. Although the turnover rate in the domestic cryptocurrency market is 156.8%, significantly higher than the global average of 111.6%, the nature of the activity has changed. Recently, there is a clear tendency to realize profits in the 2025 bull market rather than chase after rising markets.
The central bank stated, 'The domestic cryptocurrency market is largely composed of individual investors, showing a high turnover rate due to a tendency to realize profits through short-term trading.'
Concentrated risks…Concerns over market structure
According to the report, the market concentration is very high. From 2024 to June 2025, the top 10% of investors accounted for 91.2% of total trading volume, according to data from the Financial Supervisory Service. This raises concerns about the possibility of price manipulation by a small number of investors.
Due to Korea's unique regulatory environment, corporate market participation is effectively prohibited, and foreign investors cannot trade on domestic exchanges. As a result, individual investors almost monopolize the market. Additionally, the absence of professional market makers restricts liquidity, as evidenced by the recent example in October when the price of Tether surged fivefold on Bithumb during a market crash.
Global spillover effects
When domestic investors reduce their buying pressure, the global market is also affected. In the bull markets of 2017 and 2021, domestic exchanges like Upbit and Bithumb ranked among the top in global trading volume. The so-called 'Kimchi Premium' is a phenomenon where the price of cryptocurrencies in Korea exceeds overseas prices, serving as an indicator of individual investors' enthusiasm.
Recently, due to a focus on profit realization, the 2025 bull market is developing more gradually than in the past. Unlike before, domestic individual investors are not buying aggressively, significantly weakening the buying pressure in key accumulation phases in the global market.
This change did not occur independently. Previous reports from the Bank of Korea pointed to the booming stock market as a cause for the slowdown in the domestic cryptocurrency market. The KOSPI index has surged over 70% compared to the beginning of the year, recording the highest increase among major global indices, led by AI-related stocks such as Samsung Electronics and SK Hynix.
The daily trading volume of major domestic cryptocurrency exchanges has plummeted by over 80% compared to the peak in 2024. This is because domestic investors are reallocating funds to stocks and U.S. leveraged ETFs. Analyst AB Kuai Dong commented, 'Where have all the individual investors gone? The answer is right next door—the stock market.'
Korea vs Global Institutions: Diverging Paths
This is in stark contrast to the trends in the global market. While Korea maintains a focus on individual investors, the overseas market is rapidly shifting towards institutional dominance following the approval of spot Bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC) in January 2024. These products have recorded net inflows exceeding $54 billion, and BlackRock's IBIT has amassed over $50 billion in assets under management.
The Bank of Korea acknowledges this difference. The global cryptocurrency market is becoming increasingly correlated with traditional stock markets, especially during periods of macroeconomic instability or changes in monetary policy. Since 2020, the correlation between Bitcoin and the S&P 500 index has distinctly increased due to institutional entry, corporate Bitcoin adoption, and the spread of ETFs.
In contrast, the domestic cryptocurrency market is relatively disconnected from these global trends. The central bank cites high individual investor proportions, liquidity constraints, and capital controls as causes for restricted arbitrage.
Is this the time for institutional entry?
The report suggests that as regulatory reforms progress, the unique characteristics of the domestic market will weaken. Since June, the government has allowed non-profit organizations to sell cryptocurrencies, and subsequently, professional investors have also been permitted to trade on a trial basis. Approval for a spot Bitcoin ETF is also under discussion.
The Bank of Korea forecasts that allowing market participation from financial institutions and foreign investors will aid in the establishment of market-making systems and improvement of liquidity. As the proportion of institutions increases, trading volume volatility and turnover rates are likely to gradually decline.
However, the central bank also points out potential risks. The report warns that 'if companies and foreign investors with superior information and capital enter the market, domestic cryptocurrency prices could become more sensitive to supply and demand changes,' emphasizing the need for meticulous monitoring during the transition period.
Key Summary
Korea's cryptocurrency market is at a critical turning point. The shift from aggressive buying to profit realization demonstrates the maturation of the investor base, but simultaneously, the major source of momentum that fueled the global market is diminishing. As institutional foundations are established and regulatory barriers lowered, the influence of the domestic market is expected to evolve from simple individual trading volume to more sophisticated and professional capital flows.
The era where domestic individual investors led the global rally is now coming to an end. This change could significantly impact the future sentiment and trends in the cryptocurrency market.
