Recently the cryptocurrency market has seen tremendous growth. Just within the last week, the market cap of the entire crypto economy has gained half a trillion dollars, and the hype only seems to be growing. But the South Korean market particularly has attracted the attention of the world, as the Bitcoin craze has spread through society like a plague.
Now with a recent report published by Business Korea, it seems that small investors are ditching the conventional stock market and pouring their money into the volatile cryptocurrency market instead.
In 2017, South Korea’s largest cryptocurrency exchange, Bithumb, has registered a 182% increase in digital currency transactions as the monthly transactions have risen from $276 million in January to almost $52 billion in November. When compared to KOSDAQ’s data, this figure is 80% of the monthly average of the Stock Exchange ’s volume.
According to Bithumb, the exchange experienced a sharp surge in transactions in mid-2107, especially in May and August. In April, Bithumb volumes were $593.27 million, jumping to $4.86 billion in May and to $10.99 billion in July, only to reach $23.05 billion in August.
When KOSDAQ’s data is compared with Bithumb’s, the difference is apparent.
Unlike Bithumb, KOSDAQ’s market share dropped from $63.96 billion in April to $50.91 billion in May and again from $56.79 billion in July to $54.53 billion in August.
Also when the daily trading volume of 19th August is compared, Bithumb with $2.4 billion in volume surpasses KOSDAQ’s adjusted daily trading volume of $2.24 billion.
Commenting on this crazy market trend, Oh Suk Tae, a senior economist at Societe Generale Securities Korea, said: “It is apparent that the craze of virtual currencies, including bitcoin, is one of factors that adjust the KOSDAQ market.”
“There is little entry barriers on the cryptocurrency market and there is no need to analyze each item as stocks. So, the digital coin market is more driven by individual investors than the KOSDAQ market. A greater variability than the KOSDAQ is another attractive factor for small investors,” he added.
“Individual investors, who mainly invest in the KOSDAQ market, have a strong speculative inclination so they tend to make transactions in the short term. Many of them must have flowed into the virtual currency market which has a far bigger votality than the stock market and allow 24 hours of trading,” said Im Sang-guk, head researcher of the item analysis division at KB Securities.
He added: “As the craze of digital currencies have become a global phenomenon and it is hard to impose all-out regulations, the current zeal for the cryptocurrency market will not cool down shortly. However, the government’s efforts to strengthen regulations on virtual currencies and work together with small and mid-size companies and venture companies to come up with more detailed measures to vitalize the KOSDAQ market will be able to put the brakes on the digital currency craze in some degree.”
Meanwhile, South Korean authorities are concerned with the skyrocketing crypto economy. The government, which has already banned ICOs, set up a committee to study and regulate the booming crypto market. Recently, the country's communications watchdog fined a crypto exchange operators for negligence with user data.
The market has also attracted the attention of the prime minister, who expressed concern regarding the use of digital coins in illegal activities.
