South Korean Crypto Market Anticipates Institutional Investment Amid Retail Caution

The South Korean crypto market, previously driven by retail investors, is poised for potential institutional engagement, as highlighted in a Kaiko report. The market has faced setbacks in early 2025 after a peak in 2024, experiencing reduced fiat liquidity and increased market concentration. Upbit leads with 70% of volume, but the market’s share of global trading has declined significantly. Regulatory changes may allow institutional participation, potentially enhancing liquidity.

The South Korean cryptocurrency market is currently undergoing a transformation from a primarily retail-driven environment to one that is expected to attract institutional investors. According to a recent report from Kaiko, the market experienced a significant slowdown in the first quarter of 2025, following a robust period towards the end of 2024 where daily transaction volumes peaked at $300 million, reflecting a global trend observed across major exchanges.

Historically, South Korea’s exchanges have been cautious in introducing new cryptocurrencies, typically favouring the revival of existing assets through Korean won (KRW) liquidity. However, since December 2025, a series of setbacks including a martial law crisis and challenges stemming from global trade conflicts have hindered market activity, leading to a shift in investor sentiment.

The role of fiat liquidity in South Korea’s crypto market has diminished, with a heavy reliance on centralized exchanges that operate primarily with KRW. This limited usage of stablecoins has resulted in unique price dynamics, often leading to premiums on cryptocurrencies traded on these platforms. Notably, the Korean won participation in global fiat-to-crypto trading decreased from 40% in 2024 to 37% recently, influencing liquidity within the broader dollarised crypto market.

Stricter regulations have carved out a competitive landscape where only major exchanges thrive, with Upbit capturing approximately 70% of the trading volume and Bithumb expanding to around 28%. In contrast, smaller players struggle to maintain market relevance amidst this concentration. While Upbit reported $300 billion in trading volumes for Q1, the South Korean crypto market’s share plummeted from 7% to 3%, attributed to heightened competition from US exchanges following recent market rallies.

Presently, South Korea’s crypto exchanges cater predominantly to retail investors, with altcoins constituting 85% of trading volumes. However, investor behaviour shifted during the recent crisis as many opted for Bitcoin (BTC), due to its perceived stability compared to altcoins. Regulatory changes allowing institutional trading of digital assets could be pivotal in reshaping the market’s infrastructure, enhancing liquidity, and altering the overall trading dynamics within the sector. The volume-to-liquidity ratio for BTC remains notably high, indicating substantial trading activity relative to available liquidity, evidencing a robust engagement despite prevailing uncertainties.