In the first quarter of 2024, the South Korean Won (KRW) surpassed the US Dollar (USD) in trading volume for cryptocurrencies on centralized exchanges. According to a report from financial analytics company Kaiko, the Won had a transaction volume of over $456 billion, slightly surpassing the USD's volume of around $455 billion.
According to reports, the surge in trading volume in the South Korean crypto exchanges has been linked to intense competition and the emergence of a "fee war". This competition has led to a significant uptick in trading, resulting in the Korean Won being ranked as the most traded fiat currency in the global crypto market.
Increase in Korean Won Trading Attributed to Fee Wars
The appreciation of Won can be attributed to the increasing competition among South Korean exchanges. Leading companies in the field, namely Upbit, Bithumb, and Korbit, have implemented aggressive strategies in order to entice traders, including the implementation of zero-fee trading periods.
Furthermore, although Korbit's market share was not significant, Bithumb experienced a significant increase in market share when they implemented zero-fee trading.
The implementation of these tactics has resulted in a significant increase in trading activity, but it has also had an impact on the financial flow of these platforms. An instance of this is seen with Bithumb's annual profits decreasing by 60% in 2023 due to its zero-fee strategy, which was later reversed in early February 2024 after only five months of being in effect.
Despite the financial challenges, it appears that the fee conflicts are having a positive impact as market engagement has surged to levels not observed in more than 24 months. In the early stages of March 2024, trade volume reached its peak, driven by a stronger macroeconomic climate and intense market rivalry.
Market Trends and the Global Context
At present, the Korean won has a strong hold in the world of cryptocurrency trading, coinciding with significant international advancements in the crypto market. The recent approval from the financial regulator of Hong Kong for three spot Bitcoin and Ether ETFs is predicted to have a positive effect on the sentiments of the Asia Pacific market.
These ETFs, which will be available on the Hong Kong Stock Exchange, may also boost the volume of trading involving the won.
The regulatory actions in the United States continue to affect the crypto market, with the Securities and Exchange Commission closely monitoring companies like Uniswap Labs in a more cautious manner. These regulatory actions have a global impact on market dynamics and investor sentiment, potentially leading to changes in trading volumes for both fiat and crypto pairs.
Possible Perspective
During the second quarter of 2024, market analysts will closely monitor how regulatory changes and their interaction with market dynamics affect the industry. The dominance of the Korean Won in cryptocurrency trading volume reflects a larger trend towards diversification in the international crypto market.
Traders and investors are increasingly turning to alternative fiat currencies, like the US dollar, due to their competitive advantages, such as lower fees and improved market liquidity.
As the South Korean exchanges engage in a fee war, their development will hold great importance. If they can strike a balance between increasing trading volume and maintaining profits, the Korean Won is expected to maintain its position as the dominant currency against the US Dollar in the cryptocurrency trading industry.
As the market matures, the strategies adopted by these exchanges will serve as a guide for other regions looking to solidify their position in the crypto market.