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South Korean trading speculation on smaller crypto assets skyrocketed last month, leading to domestic volume on centralized exchanges outpacing those in USD.
The development came even as overall market volumes dipped to their lowest levels in three years, according to a report by Kaiko on Tuesday.
“Despite the ongoing June rally, spot trade volumes have declined significantly in Q2, falling to their lowest level since 2020,” Kaiko said.
Even still, in June’s final week of trading, volumes on Korean exchanges Upbit and Bithumb witnessed a daily peak of over $4 billion, with $3.6 billion derived from assets other than bitcoin and ether, data shows.
The sharp rise in trading volume across the region was primarily driven by Waves native token (WAVES) and bitcoin cash (BCH), Kaiko said.
In the first quarter of 2023, Upbit rose to become the second-largest exchange with a spot trading volume of $208 billion, CoinGecko reported late last month. That marks a substantial increase of $86.5 billion from the $121.5 billion recorded in the fourth quarter of 2022.
Ki Young Ju, CEO of Seoul-based crypto analytics firm CryptoQuant told Blockworks government regulations meant certain types of strategies and tools were restricted to retail investors only.
“Since Korean exchanges don’t have margin trading due to regulations, retail investors tend to invest in alts to take a risk for higher profits,” he said. “The nation’s government does not allow institutional investors to use Korean crypto exchanges.”
Domestic speculation over bitcoin cash listing on a new crypto exchange backed by Wall Street heavyweights Fidelity, Citadel Securities and Charles Schwab, dubbed EDX Markets, is one such recent example.
The fervor in Korea and elsewhere has helped push the asset to highs not seen since May 2022 above $275, arguably breaking a downtrend against bitcoin that has lasted more or less since its inception as a fork of Bitcoin in 2017.
“The Korean market has always been a very retail-focused market,” Mathias Beke, co-founder and CTO at market maker Kairon Labs, told Blockworks.
The recent subdued volatility in major cryptos over the last three months, combined with noticeable price movement in BCH, may signal a trend of domestic retail investors channeling their funds into altcoins, the co-founder added.
Despite activity having since cooled, the BCH/KRW trading pair now ranks as the third largest in terms of volume on the Upbit exchange, sitting above $110 million for the day, per CoinGecko data.
That accounts for roughly 6.3% of all volume, the third highest. By comparison, the bitcoin (BTC) to KRW trading pair on Upbit is currently in fourth place at 4.7%.
CryptoQuant analyst Bradley Park told Blockworks that while BTC and ether (ETH) make up 58.2% of global trading on crypto exchanges, they account for just 33% on Korean ones.
“About 70% are altcoins, indicating a strong preference for those coins in the region. It’s also a very closed exchange that is not easy for foreigners to use,” he said.
EUR-denominated volume dips to two-year lows
Across European markets, digital asset trading volume on centralized exchanges for June dipped to their lowest levels in two years, with the largest drop in volume stemming from Binance, Kaiko said.
The exchange continues to face scrutiny across the Bloc following its failure to secure a license from the region’s largest economy — Germany.
Binance also announced its departure from the Netherlands late last month following unsuccessful attempts to register as a Virtual Asset Service Provider with Dutch regulators.
That was echoed by Belgium’s Financial Services and Markets Authority a week later, which told the exchange to cease operations within its borders.
As such, Binance’s market share of EUR volume fell sharply by more than 40% in early 2023 to 16% by Junes end — severely denting EUR-denominated crypto volumes, Kaiko said.