Special Report on the Korean Crypto Market: Digital Subcontinent under Kimchi Premium

1. Introduction

As the global crypto market begins to stabilize, South Korea continues to showcase an "alternative boom" characterized by active trading and heightened enthusiasm.

According to data from the Bank of Korea, by the end of 2024, the total market capitalization of the South Korean crypto market will exceed $74.8 billion, with the five major domestic exchanges managing a total of $73 billion in assets. The average daily trading volume in December surged from $2.38 billion in October to $10.7 billion, surpassing the two major South Korean stock exchanges in just two months. The annual revenue of the South Korean crypto market is expected to grow from $264.3 million in 2024 to $635.4 million in 2030, with a compound annual growth rate of 16.1%.

As of April 2025, it has been confirmed that 25 million people have opened accounts at exchanges to invest in cryptocurrency. Approximately half of South Korea's 51 million population has invested in the crypto market. Even more noteworthy is South Korea's unique "Kimchi Premium" phenomenon, which refers to the significantly higher prices of cryptocurrencies on South Korean exchanges compared to other major exchanges globally. In March 2024, this premium reached 8.5%, peaking at 10% in November, far exceeding the global average, reflecting the local investors' high enthusiasm and arbitrage demand under capital controls.

The massive flow of funds, a broad user base, and unique market price differential effects together shape the high activity and extraordinary popularity of the Korean crypto market, which stands as a "golden land" of the digital age in the global crypto landscape.

2. Analysis of the Reasons for the Booming Korean crypto market

2.1 Economic Reasons

Investment channels are restricted

Traditional investment channels in South Korea are relatively limited. When real estate and stocks face high prices, declining returns, poor liquidity, and high entry barriers, investors naturally tend to seek alternative assets with higher marginal utility.

In South Korea, traditional investment channels are facing structural difficulties:

• Real Estate: In 2023, South Korea's economic growth rate is only 1.4%, and it is expected to rebound to 2% in 2024, but consumer and investment confidence remains weak. Housing prices continue to be high, showing structural contradictions. Since 2010, prices in the capital region have risen by 47.1%, and the five major metropolitan cities have seen an increase of 76.5%. In 2024, the transaction volume in the capital region is expected to decrease by 7.5% year-on-year, and Seoul has experienced three consecutive months of decline from August to October.

Faced with the "three highs and one low" situation of high housing prices, high loan rates, high interest rates, and low transaction volumes, traditional real estate no longer possesses widely adaptable investment attributes, and market participation enthusiasm has clearly cooled. Young people and low- to middle-income earners are restricted in home purchases, prompting them to turn to emerging investment channels such as crypto assets that offer high volatility and high return expectations.

• Stocks: In 2024, the KOSPI fell by 8.03%, far below the Shanghai Composite Index's +12.68% and the Nikkei 225's +17.06% during the same period. Meanwhile, the S&P 500 rose, causing the gap in returns between the two markets and the Korean market to reach 32.3%, the highest since 2000. Amid a general recovery in global stock markets, the Korean market showed a "lonely decline" situation. Investor confidence was significantly undermined.

Against the backdrop of continued sluggish performance and weak return expectations in the traditional stock market in South Korea, some investors are beginning to shift their focus to the crypto market, which has higher volatility and greater return potential.

low interest rates and loose monetary environment

Long-term loose monetary policy and low interest rate environment have prompted South Korean investors to accelerate their shift towards high-yield assets. Since the pandemic, the Bank of Korea's benchmark interest rate has remained at 3.5%, significantly lower than the Federal Reserve's rate of over 5%, leading to a decrease in the attractiveness of savings and making it difficult for real returns to withstand inflationary pressures.

Against this backdrop, the demand for high-volatility, high-return assets has increased. Cryptocurrencies have become the preferred allocation direction for risk-tolerant investors, especially among the younger demographic, due to their strong return potential, low entry barriers, and high liquidity. Overall, the low interest rate policy has diminished the attractiveness of traditional financial instruments, further driving the flow of funds towards crypto assets.

Expectation of Korean Won Depreciation

In recent years, the Korean Won has continued to depreciate, with the exchange rate against the US dollar dropping to 1473.75 won in April 2025, the lowest level since 2009. The depreciation of the won, combined with high oil prices and rising supply chain costs, has increased domestic inflationary pressure. Data shows that in March 2025, Korea's CPI rose by 2.1% year-on-year, with prices for kimchi and coffee increasing by 15.3% and 8.3%, respectively, negatively impacting residents' purchasing power and putting pressure on economic recovery.

Cryptocurrencies, as assets priced in US dollars, globally circulated, and decentralized, have become a new path for investors to hedge against domestic currency depreciation and pursue asset preservation.

2.2 Social Psychological Reasons

Long-term social class固化, high competition pressure and economic fluctuations are driving increased wealth anxiety among young people, making "money" the dominant life goal. According to data from the Bank of Korea in 2024, 72.4% of respondents believe that "economic conditions" are the primary determining factor of happiness. At the same time, a report from the Korean Statistical Office in early 2025 pointed out that 69.1% of people aged 20-39 listed "wealth freedom" as their primary life goal.

In such social sentiment, slogans like "돈이 최고야( Money is the most important)" and "현실이 개차반이야( Reality is terrible)" are popular. As traditional paths like employment, savings, and stock market returns fail to satisfy the desire for wealth, cryptocurrencies have become an investment choice for young people seeking efficiency and breaking class limitations, seen as a potential channel to achieve happiness and reverse their fate.

At the same time, the consumption concepts of the young population in South Korea are undergoing profound changes around the goal of "financial freedom," which further influences their investment preferences.

According to media reports, young people in South Korea are showing two typical types of consumption psychology differentiation:

• One is the "YOLO(You Only Live Once)" group, emphasizing enjoying life in the moment and a high-risk appetite;
• The "YONO(You Only Need One)" group tends to consume rationally and values asset accumulation.

In the YOLO group, faced with real-life pressures and class anxiety, many young people tend to see the crypto market as a "get rich quick opportunity" that surpasses the stock market, breaking through traditional wealth paths to achieve class ascension. On the other hand, the YONO group, considering asset preservation and hedging against economic uncertainty, is gradually shifting towards increasing savings and investments. According to a 2024 Generation Z consumer trend survey, about 71.7% of young respondents indicated that they would prioritize savings and asset allocation. Crypto assets have become a new investment choice due to their high returns.

Despite differing consumption attitudes, both converge in their motivation to invest in high-yield assets, and cryptocurrency precisely satisfies their common psychology of pursuing returns and wealth growth.

2.3 Why is Korea so prosperous, rather than Japan?

2.3.1 Economic Perspective: The Korean Won is relatively weak, necessitating alternative paths.

• Japanese Yen: Due to its extremely low interest rates and large foreign exchange reserves, the Japanese Yen is internationally regarded as a safe-haven currency. Even when the exchange rate of the Yen fluctuates, its financing advantages remain unchanged. The market is more willing to hold Yen assets in the face of geopolitical risks or financial turmoil to hedge against declines in other markets.
• South Korean Won: The market size is small, liquidity is weak, and it fluctuates in the same direction as global risk sentiment. Additionally, its foreign exchange reserve position is relatively weak, with some capital controls, making it difficult to hold the same status as the Japanese Yen.

Therefore, compared to Japanese investors, South Korean investors lack long-term trust and security in local currency assets, tending to seek non-local currency denominated assets that can circulate globally, and cryptocurrency closely aligns with investors' needs.

2.3.2 Economic Perspective: Traditional investment returns are lower, pursuing higher returns.

• Real Estate: South Korea's real estate investment accounts for more than 50%, significantly higher than Japan's 37%, but the overall actual return rate is lower, and there are more restrictions on real estate investments.
• Stock Market: In recent years, the South Korean stock market has been relatively weak compared to Japan. However, this has become particularly evident in 2024.

2.3.3 Policy Perspective: South Korea's Attitude is Open, Japan is Conservative and Restrictive

Compared to Japan, South Korea has adopted a more open and proactive attitude towards cryptocurrency regulation, exchange management, and tax policies.

2.3.4 Cultural Perspective: South Korea pursues quick wealth, while Japan emphasizes steady accumulation.

• Japan: Places more emphasis on "many a little makes a mickle" and "prudent financial management." The proverb "働いて、少しずつ貯める"( represents the effort of a lifetime, accumulating wealth little by little), while "家宝は寝て待て"( suggests that family treasures should wait for their own time), reflecting the Japanese tendency towards long-term accumulation and steady appreciation, emphasizing the values of restraint, accumulation, and patience.
• South Korea: Emphasizing "quick success" and "keeping up with trends", the concept of "빨리빨리(快快)" is prevalent in society, where people tend to pursue short-term high returns, eager to achieve quick wealth through stock trading, crypto trading, real estate, and other means.

The prosperity of the Korean crypto market is essentially an optimal trade-off made by investors in terms of macroeconomics, traditional assets, government attitudes, and cultural mindset. Although Japan, as another developed country in East Asia, has a relatively similar environment, it still falls slightly short compared to Korea's outstanding position in the global crypto market.

2.4 Insights from the Korean Model for the Global Crypto Market

As the landscape of the crypto market in Asia quietly changes, South Korea's "middle way" is highlighting its strategic value. Compared to Singapore's recent tightening of regulations on local projects providing services overseas, as well as the slow pace of approvals and taxation in Hong Kong and Japan, South Korea's institutional flexibility, cultural fit, and capital environment are creating new comparative advantages.

Against this backdrop, South Korea is becoming a strong candidate in the next round of the crypto hub competition in Asia, thanks to its local resource integration capabilities, technology implementation efficiency, and social and cultural cohesion. For the global market, the key insight from the Korean model is that regulation can be encouraging guidance rather than full relaxation; user education and cultural adaptation are the underlying logic of all growth; infrastructure sovereignty and international collaboration are not in conflict, but rather the dual driving forces of future development.

In the new policy game in Asia, South Korea has not only become an active consumer market but also has the potential to become a regional hub for technology and asset management. If the global encryption industry wants to localize in the future, South Korea provides a practical model worth referencing.

3. User Analysis of the Korean Market

3.1 User Profile of Korean Market

Market and Account Types: Overall Rapid Growth

• Growth in Investor Scale: As of January 2025, the number of registered individual investors in South Korea's five major exchanges has reached approximately 25.25 million. This represents an increase of about 37.6% compared to the same period three years ago. This growth reflects the rapid expansion of the market, attracting a large number of new user registrations, indicating the accelerating popularity of encryption in South Korea and the gradual increase in market penetration.
• Actual number of users growth: As of February 2025, the total number of accounts on South Korean crypto exchanges has exceeded 25 million, of which about 17.09 million accounts are actual active investors. In 2024, as the market heats up, activity levels have significantly increased: since Trump's re-election, the number of inactive accounts has decreased from about 857 at the beginning of 2024.