The price of virtual assets like Bitcoin surged in the first half of this year, leading to a 46 percent increase in the market capitalization of the domestic virtual asset market compared to the end of last year, according to a recent study. However, it is still at a significantly reduced level compared to the end of 2021, and the number of virtual asset users has been declining this year.
On Oct. 9, the Financial Information Unit (FIU) under the Financial Services Commission (FSC) released the “2023 First Half Virtual Asset Business Operators Survey Results,” which focused on these findings. The FIU compiled data submitted by 35 virtual asset business operators, including 26 virtual asset exchanges and nine wallet and custody operators, as of the end of June.
According to the survey results, the market capitalization of virtual assets in the South Korean market stood at 28.4 trillion won (US$21.01 billion) as of the end of June, representing a 46 percent, or 9 trillion won, increase compared to 19.4 trillion won at the end of 2022. This growth can be attributed to the overall price increases of major virtual assets and the recovery of investor sentiment.
In fact, the price of Bitcoin surged from US$16,547 per unit at the end of last year to US$30,441 at the end of the first half of this year, marking an 81 percent increase. Additionally, the global market capitalization of virtual assets, according to CoinMarketCap, also witnessed a 53 percent increase, rising from 1,010 trillion won to 1,540 trillion won.
However, the domestic virtual asset market is still significantly diminished compared to the end of 2021, the period before the “crypto winter,” which was a downturn in the virtual asset market. As of the end of June, the market capitalization stood at 28.4 trillion won, a sharp decline of 48.6 percent compared to the end of 2021, which was at 55.2 trillion won.
Among the top 10 domestic virtual assets in terms of market capitalization in the first half of the year, Bitcoin (BTC), Ripple (XRP), Ethereum (ETH), Dogecoin (DOGE), Cardano (ADA), and Solana (SOL) were also included in the global top 10 virtual assets.
In the first half of the year, the average daily trading volume for 26 virtual asset exchanges, or trading operators, amounted to 2.9 trillion won, marking a 1.3 percent, or 40 billion won, decrease compared to 2.94 trillion won in the second half of last year. The majority of the trading was conducted in the Korean won market, with the average daily trading amount on the CoinMarket reaching 1 billion won. Particularly, five companies had an average daily trading amount of less than 1 million won among the CoinMarket operators.
While the exchange’s revenue decreased by 1 percent, or 5.7 billion won, from 580.9 billion won in the second half of last year to 575.2 billion won in the first half of this year, the operating profit increased by 82 percent, from 124.9 billion won to 227.3 billion won, during the same period. The Korean won market contributed to this growth with a 46 percent increase, reaching 259.8 billion won. Additionally, CoinMarket also reduced its operating loss from 53 billion won to 32.5 billion won.
Moreover, 10 out of 21 CoinMarket operators had no transaction fee revenue at all, and 18 were in a “complete capital impairment” state with negative total capital. The operating profit of virtual asset exchanges in the first half of the year decreased by 86.2 percent compared to 1.64 trillion won in the second half of 2021.
As of the end of June, there were 1,399 virtual assets being traded in the domestic market, including duplicates, which increased by 2.7 percent, or 37 assets, compared to 1,362 assets at the end of 2022. However, the number of domestically distributed virtual assets, excluding duplicate listings on exchanges, decreased by 0.5 percent, or 3 kinds, to 622.
Out of the 622 listed virtual assets, 366 were exclusively listed on a single domestic exchange, and among them, 183 were virtual assets produced by Koreans or domestically produced virtual assets mainly traded on domestic operators (over 80 percent), commonly referred to as “kimchi coins.”
Out of the exclusively listed virtual assets, 124, which account for 34 percent, are small-scale virtual assets with a market capitalization of less than 100 million won. The FSC warned that caution should be exercised due to significant price fluctuations and a lack of liquidity, posing market risks.
The number of newly listed virtual assets in the first half of the year increased significantly compared to the second half of last year. There were 169 listings, including duplicates, marking a 128 percent increase from the 74 listings in the latter half of last year. Among these, listings on the Korean won market increased by 184 percent, totaling 91, while listings on the coin market increased by 86 percent, totaling 78.
On the other hand, the number of delisted virtual assets increased by 47 percent to 115, including duplicates, in the first half of the year from 78 in the second half of last year. Reasons cited included project risks (54 percent), investor protection risks (24 percent), market risks (20 percent), and technical risks (2 percent).
The amount of virtual assets transferred, or exported, by registered businesses in South Korea amounted to 29.7 trillion won in the first half of the year. Among this, the amount subject to the Travel Rule, which refers transfers of 1 million won or more, was 6.6 trillion won.
The amount of virtual assets transferred to pre-registered, or whitelisted, overseas businesses or individual wallet addresses, totaling 1 million won or more in a single transaction, amounted to 22.1 trillion won in the first half of the year. This marked a 2.4 percent, or 5 trillion won, increase compared to the second half of last year. It is estimated that this transfer is mainly for arbitrage trading.
As of June this year, the number of virtual asset users has decreased to 6,061,632 compared to 6.9 million users as of June last year. This represents a 3 percent decrease compared to the end of 2022 when there were 6,272,676 users. Among these users, 67 percent, totaling 4.03 million people, held virtual assets worth less than 500,000 won. On the other hand, the percentage of users with assets exceeding 10 million won increased by 2 percentage points to 8 percent, or 490,000, compared to the end of last year. Users with assets exceeding 100 million won amounted to 44,000, with an increase of 0.3 percentage points from the end of last year to 0.7 percent.