The Bank of Korea’s latest Financial Stability Report reveals a significant shift in behavior among Korean crypto investors, from aggressive accumulation to strategic profit repatriation, raising questions about the impact on global market dynamics.
In practice, even though the price of Bitcoin exceeded $100,000 this year, Korean investors have been taking home profits rather than increasing their holdings.
Korea's excessive trading activity shows signs of cooling
South Korea has long been a major player in the global cryptocurrency market. Despite representing only a fraction of the world’s population, the Korean Won (KRW) has consistently ranked among the top two fiat currencies globally in terms of trading volume, often even challenging or surpassing the US Dollar at peak volumes.
However, the central bank report points to a distinct shift in investor behavior. While cryptocurrency volatility in Korea remains high at 156.8% – well above the global average of 111.6% – the nature of the activity has changed. Korean retail investors are no longer chasing price rallies, but are cashing in on profits in the 2025 bull market.
“Volatility in the domestic crypto market is high because the majority of market participants are retail investors who seek to realize their profits in the short term,” the central bank stated.
Concentration risks and market structure concerns
The report highlights significant market concentration: the top 10% of investors accounted for 91.2% of total trading volume between 2024 and June 2025, according to the Financial Supervisory Authority. This concentration raises concerns about potential price manipulation by a few players.
Korea’s unique regulation – which effectively bars corporate participation and prohibits foreign investors from trading on domestic exchanges – has left the market almost entirely dominated by retail investors. The lack of professional market makers has exacerbated liquidity problems, as exemplified by Tether’s five-fold spike on Bithumb during the October market crash.
Global Ripple Effect
As Korean traders retreat from the market, global markets react. Historical data shows that during the 2017 and 2021 bull markets, Korean exchanges such as Upbit and Bithumb regularly had the highest trading volumes globally. The so-called “Kimchi Premium”, where Korean cryptocurrency prices were higher than international benchmarks, served as a reliable indicator of retail investor enthusiasm.
The emphasis on profit repatriation may have contributed to the 2025 price rally being more subdued than in previous cycles. With Korean retail investors no longer providing the same aggressive buying support, global order books have lost an important source of demand during critical accumulation phases.
The change is not happening in a vacuum. According to a previous report by the central bank, the slowdown in domestic crypto activity is due to a buoyant stock market. The KOSPI has risen more than 70% since the start of the year, becoming the world's best-performing major index, driven in particular by AI technology stocks such as Samsung Electronics and SK Hynix.
Daily trading volume on major Korean crypto exchanges has plummeted by more than 80% from its 2024 peak as local investors have diverted capital into stocks and U.S. leveraged ETFs. “Where did all the Korean retail crypto investors go? Answer: The neighboring stock market,” said AB Kuai Dong, an analyst.
Diverging Paths: Korea vs. World Institutional Deployment
Compared to global market developments, the difference is clear. While Korea is still dominated by retail investors, the international market has rapidly shifted towards institutional investors since the SEC approved spot Bitcoin ETFs in January 2024. These products have raised over $54 billion in net investments, with BlackRock’s IBIT alone managing over $50 billion in assets.
The central bank’s report highlights this divergence. According to the report, global crypto markets are still linked to traditional equities – especially during times of macroeconomic stress or monetary policy changes. Bitcoin’s correlation with the S&P 500 index has increased, especially since 2020, with the growth of institutional investors, corporate treasury adoption and ETF products.
However, the Korean market has remained relatively sheltered from international phenomena. According to the central bank, this is due to a concentration of private investors, liquidity problems, and capital controls that limit arbitrage opportunities.
What's next: institutionalization on the horizon
The report estimates that the peculiarities of the Korean market may be reduced with regulatory reforms. The government will allow non-profit organizations to sell crypto assets starting in June, and professional investors have been allowed to trade on a trial basis. There is also discussion about approving a spot Bitcoin ETF.
The central bank said that allowing financial institutions and foreign investors to participate could help build market-making systems and ease liquidity problems. The increase in the number of institutional participants would likely calm fluctuations in trading volume and reduce the volatility rate over time.
However, the central bank warns of potential risks. “As more companies and foreign investors with more knowledge and capital enter the market, domestic cryptocurrency prices may become more sensitive to fluctuations in demand and supply,” the report highlighted, stressing caution during the transition.
Result
The Korean crypto market is at a turning point. The shift from aggressive buying to profit-taking signals a maturing investor base, but it also removes a significant source of sentiment that drives global markets. As institutional structures develop and regulatory barriers are lowered, Korea’s influence on global crypto dynamics could shift from mere volumes to more sophisticated capital flows.
For now, the days when Korean retail investors single-handedly fueled global price rallies appear to be behind them – a shift that could alter market sentiment for several cycles to come.
