In a groundbreaking shift, the South Korean won has eclipsed the U.S. dollar as the most-traded fiat currency against cryptocurrencies in the first quarter of 2024. Accumulating a staggering $456 billion in trading volume on centralized crypto exchanges, the win surpassed the $455 billion U.S. dollar volume, marking a significant milestone in the realm of cryptocurrency trading. This shift was attributed to the intensifying "fee war" among Korean crypto exchanges and signifies a transformative trend in the global crypto landscape.
The South Korean won has recently made history by becoming the leading fiat currency for cryptocurrency trading, outshining major currencies like the U.S. dollar and the euro in the first quarter of 2024. This groundbreaking development has been attributed to a compelling fee battle between South Korean crypto exchanges.
According to a report by Kaiko, a prominent research firm, the trading volume denominated in the South Korean won has soared to over $456 billion, surpassing the $455 billion traded against the U.S. dollar. The burgeoning dominance of the won in the crypto trading sphere underscores the fierce competition and growth in the South Korean market.
The research firm highlighted that the surge in the won's trading volume was a result of the escalating "fee war" among Korean crypto exchanges. It pointed out that the improvement in the macroeconomic environment, coupled with the intense competition, contributed to the surge in trade volume on Korean markets. This surge reached its highest level in more than two years in early March, ultimately propelling the South Korean won to surpass the U.S. dollar in terms of cumulative trade volume in the first quarter of 2024.
Moreover, the euro-denominated trading pairs, in comparison, amassed a relatively modest $59 billion worth of cumulative volume, placing the euro in the third position for the same period. The overwhelming lead of the South Korean won signifies a seismic shift in the landscape of crypto trading, particularly when juxtaposed against the traditional fiat currencies.
The emergence of the won as the most-traded fiat for cryptocurrencies also sheds light on the aggressive maneuvers adopted by South Korean exchanges competing for market dominance. Upbit, as the country's leading crypto exchange, has maintained over 82% of the of the market share since 2021. However, the recent bull run in the cryptocurrency market ignited intensified competition among rival exchanges. Following suit, both Bithumb and Korbit launched zero-fee campaigns in late 2023 in a bid to outmaneuver their counterparts.
The impact of these zero-fee policies was notable, as Bithumb witnessed a tripling of its market share, albeit at a significant cost. Despite the surge in trade volume brought about by the zero-fee strategy, Bithumb experienced a staggering 60% drop in annual revenue in 2023. This substantial decline compelled the exchange to discontinue its zero-fee campaign just five months after its launch, highlighting the challenges and complexities of market competition and profit margins within the crypto exchange sector.
While Korbit's market share remained below 1%, the introduction of zero-fee policy trading in October 2023 catapulted Bithumb's market share. Nonetheless, the aggressive zero-fee policy led to a substantial drop in revenue, painting a nuanced portrait of the delicate balance between market share growth and sustainable profitability for crypto exchanges.
The research from Kaiko further elucidated that the trading volumes for the Korean won experienced a decline in early April but are anticipated to rebound significantly with the expected approval of spot Bitcoin and Ether exchange-traded funds (ETFs) in Hong Kong. The approval of these ETFs is poised to invigorate the crypto market and trading activity, bolstering the outlook for the South Korean win in the global crypto trading arena.
In essence, the triumph of the South Korean in crypto trading underscores the dynamic and fiercely competitive landscape of the cryptocurrency market and the vital role played by fee structures and market policies in shaping trading volumes and market dynamics. This shift, along with the ongoing developments in the cryptocurrency market, sets the stage for an exciting and transformative period for global crypto trading and market trends.
(ZOLTAN VARDAI, COINTELEGRAPH, 2024)