In Q1 of 2024, the South Korean Won (KRW) surpassed the US Dollar (USD) as the most traded currency against cryptocurrencies based on trading volume. According to a report by financial analytics firm Kaiko, over $456 billion worth of transactions in centralized cryptocurrency exchanges involved the Won during this period. The USD came in second place with approximately $455 billion in trading volume.
In the intensely competitive South Korean cryptocurrency exchange market, a “fee battle” has emerged, causing a significant surge in trading volume. As a result, the Korean won has become the most frequently used fiat currency in global crypto transactions.
Fee Wars Fuel Korean Won Trading Surge
One reason Won finds the exchanges more valuable is the increasing rivalry among South Korean cryptocurrency platforms. Market leaders like Upbit, Bithumb, and Korbit are responding with competitive strategies to lure traders, including offering zero-fee trading sessions.
Zero-fee trading policies and other similar strategies have significantly increased trade volumes on these platforms. However, they have brought about challenges for the cash flows of these businesses. For instance, Bithumb experienced a 60% decrease in annual profits in 2023 due to its zero-fee policy, which was introduced in July 2022 and later reversed in early February 2024 after only five months in effect.
Despite our financial challenges, the fierce price battles appear to be effective as market activity has surged to heights not witnessed since early 2022. In March 2024, trading volume peaked remarkably, driven by an improved economic climate and intense market rivalry.
Global Context and Market Trends
At present, the Korean won holds a significant position in cryptocurrency trading as the global crypto market undergoes several major transformations. Notably, the recent approval of three Bitcoin and Ether Exchange-Traded Funds (ETFs) by the Hong Kong financial authorities is predicted to boost investor sentiment in the Asia Pacific area. These upcoming ETFs, scheduled for listing on the Hong Kong Stock Exchange, may also enhance trading volume involving the Korean won.
An additional factor to consider is the influence of US regulations on the cryptocurrency market. The Securities and Exchange Commission closely monitors companies like Uniswap Labs, and any regulatory actions taken can significantly impact global market trends and investor confidence. As a result, trading volumes may fluctuate for various fiat and crypto pairings.
Potential Outlook
In the second quarter of 2024, regulatory changes will be a major focus for market analysts as they assess their influence on crypto markets. The significant role played by the Korean Won in cryptocurrency trading is indicative of a larger trend towards diversification within the global crypto community. Traders and investors are increasingly looking beyond traditional safe-havens like the US dollar, opting instead for other fiat currencies that offer advantages such as lower transaction fees or superior market liquidity.
The development of the fee war among the South Korean exchanges will also be crucial. Should these platforms be able to find a middle ground between increasing volume and keeping profit, the Korean Won will continue to be the top currency against the US Dollar in the crypto trading sector. With the maturing market, the approaches that these exchanges favor will become the template for other regions that would like to strengthen their position in the cryptocurrency market.
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2024-04-16 19:51