The Bank of Korea’s latest Financial Stability Report reveals a major behavioral shift among South Korean crypto investors, from active accumulation to strategic profit-taking, raising questions about the impact on global market dynamics.
This means that even though Bitcoin has soared above $100,000 this year, Korean investors are cashing in rather than doubling down.
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South Korea’s large-scale trade activity shows signs of slowing down
South Korea has long established a position in the global cryptocurrency market that surpasses that of its own country. Despite representing a fraction of the world’s population, the Korean Won (KRW) trading pair consistently ranks in the top two of the world’s fiat currencies by volume, often rivaling or even surpassing the US dollar at its peak.
However, the Bank of Korea’s report suggests that there has been a notable change in investor behavior. South Korea’s cryptocurrency turnover rate is still 156.8%, significantly higher than the global average of 111.6%, but the nature of its activity is changing. Korean retail investors are now locking in profits in the 2025 bull market, rather than chasing the bull market.
“The domestic virtual currency market has a high turnover rate as most participants are individual investors who tend to profit from short-term transactions,” the central bank noted.
Concentration risk and market structure concerns
The report highlights significant market concentration. According to data from the Financial Supervisory Service, from 2024 to June 2025, the top 10% of investors accounted for 91.2% of total trading volume. This concentration raises concerns about potential price manipulation by a small number of players.
South Korea’s unique regulatory environment, which effectively prohibits corporate participation and prohibits foreign investors from trading on domestic exchanges, has created a market almost entirely dominated by individual traders. The lack of professional market makers also leads to liquidity constraints. as evidenced by 5x Tether Bithumb soared during the October market downturn.
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global ripple effect
As Korean traders pull out, global markets take notice. Historical data shows that during the 2017 and 2021 bull markets, Korean exchanges such as Upbit and Bithumb frequently ranked among the top in terms of global trading volume. The so-called “Kimchi Premium,” where South Korean cryptocurrency prices trade above international benchmarks, served as a reliable indicator of retail euphoria.
The current shift to profit-taking behavior may be contributing to a more cautious pace of appreciation in 2025 compared to previous cycles. With Korean retail investors no longer providing the same level of active bidding support, the global order book has lost a key source of buying pressure during the critical accumulation phase.
This change is not occurring in a vacuum. The Bank of Korea’s previous report attributed the slump in domestic cryptocurrencies to the booming domestic stock market. The KOSPI has risen more than 70% since the beginning of the year, led by AI-related stocks such as Samsung Electronics and SK Hynix, making it the world’s best-performing major index.
Daily trading volumes on South Korea’s major crypto platforms have fallen by more than 80% compared to their 2024 peak as domestic investors diverted their funds to stocks and US leveraged ETFs. Analyst AB Kuai Dong said, “Where have Korean individual investors in the cryptocurrency industry gone? The answer is the neighboring stock market.”
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Watershed: South Korea vs. Global Institutional Adoption
The difference with global market trends is striking. Although South Korea is still dominated by retail, the international market has rapidly become institutionalized since the SEC approved a spot Bitcoin ETF in January 2024. These products have attracted over $54 billion in net inflows, and BlackRock’s IBIT alone has over $50 billion in assets under management.
The BOK report acknowledges this disconnect, noting that global crypto markets have become increasingly correlated with traditional equities, especially during times of macroeconomic stress and monetary policy changes. The correlation between Bitcoin and the S&P 500 has increased significantly since 2020 due to institutional investor participation, corporate treasury adoption, and ETF adoption.
In contrast, the Korean market remains relatively isolated from these global trends. The central bank blames this on a high concentration of retail investors, liquidity constraints and capital controls that limit arbitrage opportunities.
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What comes next: The horizon of institutionalization
The report suggests that the South Korean market may become less unique as regulatory reforms progress. The government has allowed non-profit corporations to sell crypto assets since June, and has since allowed professional investors to trade on a trial basis. There is also ongoing debate about the approval of spot Bitcoin ETFs.
The Bank of Korea projects that allowing financial institutions and foreign investors to participate could help establish an appropriate market-forming mechanism and ease liquidity constraints. Increased institutional investor participation may reduce volume volatility and lower turnover over time.
But the central bank has also warned of potential risks. “Domestic crypto prices may become more sensitive to changes in supply and demand as well-informed and well-capitalized companies and foreign investors enter the market,” the report warned, stressing the need for careful monitoring during the transition period.
conclusion
South Korea’s cryptocurrency market is at a turning point. The shift from aggressive buying to profit-taking signals a maturation of the investor base, but it also means the loss of an important source of global market momentum. As the institutional framework develops and regulatory barriers come down, South Korea’s influence on global crypto trends could evolve from raw retail volumes to more sophisticated capital flows.
For now, the days of Korean retail traders single-handedly driving global market rallies appear to be over, but that transition could reshape market sentiment patterns for future cycles.
