South Korea’s individual investors have long been among the most active cryptocurrency traders in the world. Their retreat from digital assets is now exposing a weakness at the center of the country’s exchange industry.
Combined trading volume at South Korea’s five largest won based cryptocurrency exchanges fell to $146 billion during the second quarter, down 49.5 percent from $290 billion a year earlier, according to CoinGecko. The group includes Upbit, Bithumb, Coinone, Korbit and GOPAX, which together dominate cryptocurrency trading conducted in South Korean currency.
The decline matters beyond the immediate drop in trading activity. South Korean exchanges earn nearly all of their revenue from commissions on spot transactions, leaving them more exposed to changes in individual investor sentiment than financial platforms with broader sources of income.
Bithumb, South Korea’s second largest cryptocurrency exchange, is preparing for a possible initial public offering in 2028. Its revenue structure could become a central issue in that effort. Transaction fees account for 99.99 percent of the company’s sales, meaning its earnings rise and fall almost entirely with cryptocurrency trading volume.
Upbit faces a similar problem. The exchange is operated by Dunamu, a South Korean financial technology company that runs the country’s largest cryptocurrency trading platform. Exchange commissions account for 97.49 percent of Dunamu’s revenue.
That dependence has already produced sharp swings in earnings. Dunamu’s first quarter revenue fell 54.6 percent from a year earlier, while operating profit declined 77.8 percent. Bithumb’s revenue dropped 57.6 percent, and operating profit plunged 95.8 percent. Bithumb also recorded a net loss.
Trading conditions remained weak during the second quarter. Industry participants attributed the slowdown partly to South Korean investors moving money into the stock market as domestic equities rallied. Lower prices for Bitcoin and other cryptocurrencies also reduced demand for trading.
A cryptocurrency tax scheduled to take effect in January 2027 could place additional pressure on activity. The larger problem, however, is that South Korean exchanges have few alternatives when spot trading slows.
South Korean regulations have kept domestic platforms focused largely on direct purchases and sales of digital assets. Overseas exchanges such as Binance offer a wider range of products and services, including highly leveraged trading, while Korean operators remain far more dependent on basic transaction commissions.
That difference has created an uncomfortable trade off. Restrictions can limit access to products that carry greater risks, but they also make it harder for exchanges to develop additional sources of revenue.
For Bithumb, the question ahead of a possible public offering is no longer simply whether cryptocurrency trading will recover. The company will also need to show that it can become a sustainable business when South Korea’s individual investors are no longer trading at boom era levels.
The fall in volume suggests that the country’s cryptocurrency market may be entering a different phase. Exchanges built around rapid retail trading growth must now prove that they can survive a prolonged slowdown without relying almost entirely on the next surge in speculative activity.
