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

1. Introduction

As the global crypto market's heat tends to stabilize, South Korea continues to showcase an "alternative boom" with active trading and rising enthusiasm.

According to a report released by the Bank of Korea on April 21, it shows that by the end of 2024, the total market value of the Korean crypto market will exceed 100 trillion won (approximately 74.8 billion USD), and the five major local exchanges will manage a total of 73 billion USD in assets. The daily trading volume in December surged from 2.38 billion USD in October to 10.7 billion USD, surpassing the two major Korean stock exchanges in just two months. The annual income of the Korean crypto market is expected to grow from 264.3 million USD in 2024 to 635.4 million USD in 2030, with a compound annual growth rate of 16.1%. As of April 2025, 25 million people have opened accounts on virtual asset exchanges, accounting for about half of the total population of Korea.

More strikingly, the unique "Kimchi Premium" phenomenon of the Korean crypto market refers to the significantly higher prices of cryptocurrencies on Korean exchanges compared to other major exchanges worldwide. In March 2024, this premium reached 8.5%, peaking at 10% in November, far above the global average, reflecting the high enthusiasm of local investors and the arbitrage demand under capital controls.

The massive flow of funds, extensive user base, and unique market price differential effects have jointly shaped the high activity and extraordinary heat of the Korean crypto market, making it akin to a "golden land" in the digital age within the global crypto landscape.

2. Analysis of the Reasons for the Hot Korean Crypto Market

2.1 Economic Reasons

Investment channels are limited

Traditional investment channels in South Korea are relatively limited. When traditional investment products such as 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%. Although it is expected to rise to 2% in 2024, consumer and investment confidence remains weak. Since 2010, housing prices in the capital region have increased by 47.1%, while the five major metropolitan cities have seen a rise of 76.5%. In 2024, the transaction volume in the capital region is expected to decrease by 7.5% year-on-year, with Seoul experiencing a consecutive decline for three months from August to October.

In the face of 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 the widely adaptable investment attributes. Young people and low- to middle-income earners are restricted in property purchases, prompting them to turn to emerging investment channels such as crypto assets that have high volatility and high return expectations.

• Stocks: In 2024, the KOSPI fell by 8.03%, far lower than the Shanghai Composite Index's +12.68% and the Nikkei 225's +17.06% during the same period. At the same time, the S&P 500 rose, causing the income gap between the two markets and the Korean market to reach 32.3%, the highest since 2000. Amidst a general recovery in global stock markets, the Korean market exhibited a "lonely downward" trend, significantly undermining investor confidence.

Against the backdrop of continued sluggish performance and weak return expectations in the South Korean traditional stock market, some investors are beginning to turn their attention to the more volatile and higher return potential of the crypto asset sector.

low interest rates and loose monetary environment

The long-term accommodative 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 been maintained at 3.5%, significantly lower than the Federal Reserve's rate of over 5%, resulting in a decline in the attractiveness of savings and making it difficult for real returns to withstand inflationary pressures.

Against this backdrop, the demand for high volatility and high return assets has increased. Cryptocurrencies have become the preferred allocation direction for risk-tolerant investors, especially the younger demographic, due to their strong return potential, low entry barriers, and high liquidity. Overall, the low interest rate policy has weakened the appeal of traditional financial instruments while further driving 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, South Korea's CPI rose by 2.1% year-on-year, with prices for Kimchi and coffee increasing by 15.3% and 8.3%, respectively, harming residents' actual purchasing power and putting pressure on economic recovery.

Cryptocurrency, as a dollar-denominated, globally circulated, and decentralized asset, has become a new path for investors to hedge against domestic currency depreciation and pursue asset preservation.

2.2 Social Psychological Reasons

According to the theory proposed by economist Samuelson that "happiness = utility/desire," when desires rise rapidly while the acquisition of utility is limited, individual happiness will significantly decline.

• Long-term social class solidification, high competitive pressure, and economic fluctuations have intensified 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 status" is the primary determining factor of happiness. At the same time, a report by the Korean Statistical Office in early 2025 pointed out that 69.1% of people aged 20-39 listed "financial 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.

• Under the traditional paths such as employment, savings, and stock market returns failing to meet wealth desires, cryptocurrency has become a preferred investment choice for young people pursuing efficiency and breaking through class limitations, seen as a potential channel to achieve happiness and reverse fate.

At the same time, the consumption concept of the young population in South Korea is undergoing profound changes, further influencing their investment preferences. According to reports, young people in South Korea are showing two typical trends in consumption psychology:

• "YOLO (You Only Live Once)" group, emphasizing living in the moment and high risk tolerance;
• The "YONO (You Only Need One)" group tends to be rational consumers who value asset accumulation.

In the YOLO group, many young people tend to see the crypto market as a "get-rich-quick opportunity" that surpasses the stock market, breaking through traditional paths to wealth and achieving class ascension. In contrast, the YONO group gradually shifts towards increasing savings and investments due to considerations of asset preservation and hedging against economic uncertainties. According to a 2024 Generation Z consumption trend survey, about 71.7% of young respondents stated 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 investment motivations for high-yield assets, and cryptocurrency perfectly meets their shared psychology of pursuing returns and wealth growth.

2.3 Why is Korea so prosperous instead of Japan?

2.3.1 Economic Perspective: The Korean Won is relatively weak, requiring alternative pathways.

• 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 during geopolitical risks or financial turmoil to hedge against declines in other markets.

• Korean Won: The market size is small, liquidity is weak, and it fluctuates in the same direction as global risk sentiment. Additionally, its position in foreign exchange reserves is relatively weak, with some capital controls, making it difficult to maintain the same status as the Japanese Yen.

Therefore, compared to Japanese investors, Korean investors are more lacking in long-term trust and security in domestic currency assets, tending to seek non-local currency denominated assets that can circulate globally, and cryptocurrency highly fits the needs of investors.

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

• Real Estate: South Korea's real estate investment accounts for over 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 been particularly noticeable in 2024.

2.3.3 Policy Perspective: South Korea has an open attitude, while Japan is conservative and restrictive.

South Korea's policy towards cryptocurrency is generally more open, while Japan is relatively conservative.

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

• Japan: Places greater emphasis on "small amounts add up" and "prudent financial management". The proverb "一生懸命働いて、少しずつ貯める" (Work hard all your life and save little by little) and "家宝は寝て待て" (Family treasures wait for themselves) reflect the Japanese tendency towards long-term accumulation and steady appreciation, emphasizing values of restraint, accumulation, and patience.

• South Korea: Emphasizes "quick success" and "keeping up with trends". The concept of "빨리빨리 (fast fast)" is prevalent in society, and people are more inclined to pursue short-term high returns, eager to achieve rapid wealth through stock trading, crypto trading, real estate, and other means.

The prosperity of the crypto market in South Korea is essentially the 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 South Korea's standout 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 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 approval and taxation in Hong Kong and Japan, South Korea's institutional flexibility, cultural alignment, and capital environment are forming a new comparative advantage.

In this context, South Korea is becoming a strong candidate in the next round of the battle for crypto hubs in Asia, leveraging its local resource integration capabilities, technology implementation efficiency, and social cultural stickiness. For the global market, the key insight from the South Korean model is that regulation can be a form of encouragement rather than a complete relaxation; user education and cultural adaptation are the underlying logic for all growth; infrastructure sovereignty and international collaboration are not in conflict, but rather are a dual driving force for future development.

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

3. User Analysis of the Korean Market

3.1 User Profile of the Korean Market

Types of Markets and Accounts: Overall Rapid Growth

• Growth in the number of investors: As of January 2025, the number of registered individual investors at South Korea's top five exchanges 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, and indicates the accelerating popularity of encryption in South Korea, with gradual increases in market penetration.

• Actual user growth: As of February 2025, the total number of accounts at South Korean crypto asset exchanges has exceeded 25 million, of which approximately 17.09 million accounts are actual active investors. In 2024, as the market trends heated up, the activity level has significantly increased: since Trump's re-election as president, the number of inactive accounts has dropped from the beginning of 2024.