Crypto Investment Frenzy: Why is South Korea one of the hottest markets in the world?

Author: Zen, PANews

Looking at the global cryptocurrency market, in terms of madness, there are few markets that can be compared with Korean investors. They have repeatedly pushed up the currency prices of local exchanges, and even gave birth to the unique phenomenon of "kimchi premium" - the same Bitcoin is often 3 to 5 percentage points more expensive in South Korea than the global market.

On February 3 this year, affected by Trump's tariff war concerns, South Korea's Bitcoin "Kimchi Premium" soared to 9.7% at 2 a.m., setting a 10-month high since April 2024. Kimchi premiums usually rise during bull markets, but can also surge during panic selling, due to lower selling pressure on South Korean exchanges than global markets.

In the altcoin market, which Korean investors prefer, this premium is even more crazy. In July last year, the AVAIL token soared 1,300% on the day of listing of the Korean crypto exchange Bithumb, which is quite different from the gains of most other centralized exchanges, with a premium of over 200% at most.

In a paper entitled "Research on the Korean Virtual Asset Market and Price Gouging Phenomenon" by Bai Yanzhu, a researcher at the Korean Institute of Finance, pointed out: "The proportion of asset transactions outside the top ten virtual assets in South Korea is relatively high and it is easy to become the target of price manipulation." And these manipulated investors are very similar to those of the Netflix popular Korean drama "Squid Game" - driven by the temptation of money and unswervingly investing in the game without understanding the rules.

**Cryptocracy boom swept South Korea, with investors surged across all

walks of life**

According to the East Asia Ilbo , co-Democratic MP Ando-jae disclosed on March 21 that information he received from five domestic virtual currency exchanges including Upbit, Bithumb, Coinone, Korbit, Gopax, etc. showed that at the end of last year, there were 9.667023 million investors with tradable accounts on these exchanges, accounting for about 18.7% of South Korea's total population, an increase of as much as 52.6% compared with the previous year. The total crypto assets held by these investors reached 105.01 trillion won (about US$71.5 billion).

This cryptocurrency boom not only swept ordinary investors, but also showed a trend of wide penetration among the public official community. According to the Ethics Committee of South Korean Government Officials on March 27, over 20% of the 2,047 public officials surveyed hold cryptocurrencies, slightly above the national average. The 411 officials who invest in crypto assets hold a total of 14.4 billion won (USD 9.8 million) worth of cryptocurrency, with an average investment of nearly USD 24,000.

The surge in the number of investors has also brought considerable profit growth to the South Korean cryptocurrency exchange. The Korea Herald reported that Dunamu, the operator of Upbit, South Korea's largest cryptocurrency exchange, rose 85% year-on-year to 1.19 trillion won (US$811 million).

In fact, the trading scope of South Korean crypto investors is not limited to local platforms. In recent years, the trend of funds flowing to overseas exchanges has become increasingly obvious. According to the South Korean Financial Intelligence Agency (FIU) disclosed in November last year, in the first half of 2023, the total amount of crypto assets transferred from Korean domestic exchanges to overseas exchanges reached 52.3 trillion won, of which 203,000 users chose Binance or Coinbase.

In addition to the large number of participants and large capital scale, Korean investors have also become more aggressive in risk appetite, and they prefer to invest in highly volatile altcoins. About 80% of the crypto assets traded on Upbit are tokens other than Bitcoin and Ethereum, making the Korean cryptocurrency market a "speculative playground."

So, what exactly makes Koreans so passionate about crypto investment? According to the "State Status of the South Korean Cryptocurrency Market" report released last year by Presto Labs, South Korea has been one of the largest markets in the cryptocurrency field since 2017, with the Korean won ranking second in global fiat currency trading volume. The report said that South Korea's crypto investment boom is due to cultural factors such as extremely high Internet penetration and tech-savvy population, as well as risk-oriented investment culture, and trends that spread rapidly.

In addition, the extreme desire for money and material in South Korea has also become a breeding ground for speculators.

Materialism and "Money Better than Everything"

In recent years, the term "financial healing" (금융치료) has been popular among young office workers in South Korea, which refers to using money to heal a wounded mind and relieve depression or stress. It is not difficult to imagine that when a hard-working and exhausted worker is depressed, when wages or bonuses suddenly arrive, the natural joy will instantly dilute the pressure, and even physical discomfort will be greatly reduced.

From a scientific point of view, this "financial healing" may be feasible. Human beings are born with a reward mentality and long for the efforts they put in place to get corresponding rewards. For the M generation who was born from 1981 to 1996 and grew up in the globalization and Internet era and the Z generation who were born from 1997 to 2010, on the one hand, they regard money as an important measure of personal value, and on the other hand, they are under great economic pressure and attach great importance to returns. Therefore, when they receive corresponding economic rewards, psychological pressure will be alleviated.

To a certain extent, the widespread recognition of "financial healing" by the M and Z generations in South Korea shows that in the context of South Korea's economic system and social security, it is already a deep-rooted concept that accumulating money as the primary goal is already a deep-rooted concept. The world value survey completed in 2018 by the international research project World Values ​​Survey (WVS). The agency survey found that 45% of South Korean nationals considered themselves "materialists", which is significantly higher than that of Japan (21.6%), France (19.2%) and the United States (14.4%).

According to a survey released by the Pew Research Center in November 2021, South Korean citizens put economic stability first, and the proportion of choosing "material happiness" as the source of meaning in life is the highest, followed by physical and mental health and family relationships, which is in sharp contrast to the 14 other countries surveyed to list "family and children" as the primary source of meaningful life. Based on this mentality, many Koreans often dominate money even in the field of interpersonal communication.

This strong desire for money has also led many Korean citizens, especially the younger generation, to choose leveraged investment. According to statistics from the South Korean Financial Regulatory Bureau (FSS), in the year ended October 2024, the accumulated debt of Koreans reached 476.9 trillion won, of which nearly 28% (134 trillion won) were borrowed by individuals in their 20s and 30s.

In addition, there is a strong jealousy and comparative mentality in Korean society, which can be seen from the proverb "If my cousin buys land, I will have a stomachache" (사촌이땅을사면배가아프다). In this environment, people are more likely to have envy and jealousy towards those who have mastered wealth. Especially when money is seen as the most important measure of success, some Koreans' desire for wealth has become stronger.

The desire for wealth and finance has also made ordinary investors flock to so-called successful investors. Therefore, it has a considerable influence in crypto KOLs in South Korea. They publish information through YouTube or Telegram communities, guiding fans to purchase a project or register a certain exchange using their rebate link. The top KOLs can receive millions of dollars in commission rebates every month. The well-known anchor Inbeom even launched its own meme coin BugsCoin. But KOL is often accompanied by huge controversy about "cutting leeks", while Korean retail investors are like wild grass, and they grow again with the spring breeze. Even after experiencing two major crises of Terra and FTX, they still continue to do so.

Regarding the above phenomenon, Professor Jeon Hong-jin of the Department of Mental Health Medicine of Samsung Seoul Hospital said that if you are accustomed to "financial healing", you will have a stronger desire for money. Over time, in order to achieve the same psychological satisfaction, you need to obtain more and more money. But material resources are limited after all, so financial treatment cannot be a permanent solution. He also added: "If you indulge in cryptocurrency or stock investment in order to "receive financial therapy", it may actually cause more serious psychological problems."

**Under the solidified wealth order, the crypto market becomes a

breakthrough**

In South Korea, where class and wealth are severely solidified, the opportunities for the younger generation to accumulate assets are usually limited. However, under the influence of the concept of "money first", when the failure of traditional investment methods and the lack of wealth growth channels are intertwined, it has formed a driving force for promoting the prosperity of South Korea's crypto market to a certain extent.

In South Korea, wealth accumulation has long relied on real estate and stock markets, especially in real estate that was regarded as a major investment in the past, which has become an important factor in dragging down economic growth and aggravating social inequality. The common point of these two types of assets is that the accumulation of wealth often depends on people who enter the market early and hold it for a long time, thus forming a huge vested interest group. These groups have formed a "Matthew effect" in wealth growth by controlling asset prices, policy influence and market entry thresholds. For ordinary citizens, especially the younger generation, this gap is getting wider and wider.

Due to the extremely high entry threshold in the real estate market, even if young people have stable income, it is difficult for them to achieve wealth growth through this traditional channel. Although there is a phenomenon of "Dongxue Ant" (referring to Korean retail investors) in the stock market, the market is essentially dominated by large capital, namely institutional investors, and individual investors have limited influence in the market.

Han Yongxie, director of the Korean Institute of Social Finance, said: "South Korea society has turned to a mentality of survival of the fittest. This country does not have a strong social security system like Nordics. There are also many debates on issues such as the exhaustion of the country's pension. The older generation mainly discusses these issues from their perspectives, and young people have little say."

Amid anxiety about reality and the future, the cryptocurrency market provides a different path to wealth accumulation. Due to its decentralization, it is relatively uncontrolled by vested interests. For vested interests of the traditional wealth system, the cryptocurrency market may be an unfamiliar and difficult to understand game rules because it does not follow the operating logic of the traditional financial market and is full of multiple factors such as technology, community-driven, and market sentiment.

In addition, the cryptocurrency industry itself is still in its infancy, allowing young people with limited funds to enter. Even though many people expect the cryptocurrency market to go through a process similar to the Internet bubble and may experience a bubble burst, they are still optimistic that it will eventually grow and achieve asset growth.

In the context of employment instability, income stagnation and social mobility, providing a whole new opportunity for wealth accumulation for those who are difficult to improve their economic status through traditional means cryptocurrency has become a "symbol of hope." In other words, the cryptocurrency market may be the new market created by inequality caused by the traditional wealth accumulation model in South Korea.

Of course, this hope comes with risks.

It is worth noting that unlike the age distribution of investors that everyone imagines, the latest disclosure of the joint Democratic MP Anduo Jie also shows that the number of middle-aged and elderly crypto investors in South Korea is increasing significantly, with about one-quarter of cryptocurrency investors over 50 years old. And among the "big investors" with virtual currencies of more than 1 billion won, half of the investors are over fifty years old.

Professor Zhao Yancheng of International Business at Decheng Women's University believes that before the craze in the South Korean crypto market evolves into a frenzy, Korean society must seriously think about reasonable solutions. The core of the solution should be to effectively regulate the long-term monopoly behavior of vested interest groups that transcend the law, and fundamentally correct the already seriously tilted wealth distribution system.