Concerns are being raised that the cryptocurrency market which recently seems to be overheating can encroach on the domestic stock capital. As small investors who want to make a profit with a short-term investment have turned their eyes to digital currencies, there is an outflow of capital which should be circulated in the stock market, including the KOSDAQ.
According to South Korea’s largest bitcoin exchange Bithumb, the amount of monthly virtual currency transactions came to 56.29 trillion won (US$51.91 billion) in November, up more than 182 times from 300 billion won (US$276.63 million) in January this year. The figure accounts for over 80 percent of 68.71 trillion won (US$63.36 billion) of the monthly average transaction volume in the KOSDAQ this year.
The amount of monthly transactions on the Bithumb showed a sharp increase especially in May and August this year. The figure jumped from 64.34 billion won (US$593.27 million) in April to 5.27 trillion won (US$4.86 billion) in May and from 11.92 trillion won (US$10.99 billion) in July to 25 trillion won (US$23.05 billion) in August.
The amount of monthly transactions on the KOSDAQ market dropped from 69.37 trillion won (US$63.96 billion) in April to 55.21 trillion won (US$50.91 billion) in May and from 61.58 trillion won (US$56.79 billion) in July to 59.14 trillion won (US$54.53 billion) in August, respectively, over the same period.
The daily trading volume on the Bithumb stood at 2.6 trillion won (US$2.4 billion) on the 19th alone of August when the KOSDAQ index was adjusted. The figure surpassed 2.44 trillion won (US$2.24 billion) of the daily trading volume on the KOSDAQ market on the same day.
Stock market experts also said the stock capital is highly likely to slip out to the digital currency market. Oh Suk Tae, a senior economist at Societe Generale (SG) Securities Korea, said, “It is apparent that the craze of virtual currencies, including bitcoin, is one of factors that adjust the KOSDAQ market.”
He added, “There is little entry barriers on the cryptocurrency market and there is no need to analyze each item as stocks. So, the digital coin market is more driven by individual investors than the KOSDAQ market. A greater variability than the KOSDAQ is another attractive factor for small investors.”
Im Sang-guk, a head researcher of the item analysis division at KB Securities, also said, “Individual investors, who mainly invest in the KOSDAQ market, have a strong speculative inclination so they tend to make transactions in the short term. Many of them must have flowed into the virtual currency market which has a far bigger votality than the stock market and allow 24 hours of trading.
Experts pointed out that whether the current trend continues or not will depend on the government’s policies. Im said, “As the craze of digital currencies have become a global phenomenon and it is hard to impose all-out regulations, the current zeal for the cryptocurrency market will not cool down shortly. However, the government’s efforts to strengthen regulations on virtual currencies and work together with small and mid-size companies and venture companies to come up with more detailed measures to vitalize the KOSDAQ market will be able to put the brakes on the digital currency craze in some degree.”