Crypto exchanges grapple with falling trading volume as investors shift to stocks

A man walks past Bithumb's headquarters in Seoul, Thursday, as Bitcoin hits a new all-time high of $112,000. Yonhap

Korean cryptocurrency exchanges are grappling with declining trading volumes due to a capital shift toward the domestic stock market, industry officials said Thursday.

To stay afloat, exchanges are rolling out new strategies, including coin lending services that enable leveraged trading and short-selling in cryptocurrencies.

According to data from market tracker CoinGecko, average monthly trading volume at Korea's five major cryptocurrency exchanges fell by 34 percent in June from the previous month, dropping to 3.17 trillion won ($2.3 billion).

This marks a 71 percent plunge compared to January, when the market was booming following the inauguration of U.S. President Donald Trump.

The downturn is driven by renewed investor interest in domestic equities. President Lee Jae Myung, who began his term on June 4, has vowed to revitalize the stock market through market-friendly policies. As a result, the benchmark KOSPI has reached its highest level in nearly four years.

Despite Bitcoin hitting a new all-time high on Thursday at $112,000, overall investor interest seems muted.

Crypto services provider Matrixport noted in a report that the sharp decline in trading volume reflects fading retail investor interest. "The market is clearly in need of a new catalyst, and for now, many retail investors seem to have checked out for the summer."

With trading volume — the primary revenue source for cryptocurrency exchanges — in decline, they are turning to new business models to diversify their income streams.

A notable example is the introduction of "coin lending" services, which allow users to borrow cryptocurrencies by putting up existing digital assets as collateral.

Upbit offers a lending service through which users can borrow Bitcoin, Tether and Ripple. Borrowing is permitted for amounts ranging from 20 to 80 percent of the collateral’s value, with a maximum limit of 50 million won. A usage fee of 0.01 percent is charged every eight hours, in addition to a one-time application fee of 0.05 percent. Collateralized assets are frozen for the duration of the loan, which can last up to 30 days.

Bithumb provides a similar service, but for a broader range of 10 cryptocurrencies, including Ethereum, Solana and Dogecoin. Users can borrow up to four times the value of their collateral, with a daily service charge of 0.05 percent. Access is limited to users with at least 10 million won in trading volume over the previous month.

Market watchers say these services have effectively introduced leverage and short-selling to Korea's crypto market, allowing investors to adopt more diverse strategies in response to shifting conditions.

Global exchanges like Binance offer a broad suite of services, including derivatives, custody and lending. In contrast, Korean exchanges had long been restricted to spot trading due to regulatory constraints.

"The service is expected to boost trading volume and enhance the profitability of the exchanges," said Declan Kim, a research analyst at DeSpread. "The government has adopted a more favorable stance toward cryptocurrencies, and the launch of these services is viewed as part of that broader policy shift."