Trading drought puts crypto exchange earnings at risk

The price of Bitcoin is displayed on an electronic board at Bithumb in Seoul, as the cryptocurrency dipped below the $100,000 mark on Nov. 5. Yonhap

Korea's cryptocurrency exchanges are facing mounting earnings pressure as a sharp market downturn erodes trading volumes, industry officials said Sunday. The slump marks a stark reversal from the third quarter, when soaring crypto prices fueled record profits.

According to disclosures filed with the Financial Supervisory Service, Dunamu, operator of Upbit, posted 235.3 billion won ($161.7 million) in operating profit, up 180 percent from a year earlier. Revenue jumped 104 percent to 385.9 billion won, while net income quadrupled to 239 billion won.

Bithumb also surged, with operating profit rising nearly eightfold to 70.1 billion won. Revenue increased 184 percent to 196 billion won, while net income soared 34-fold to 105.4 billion won.

Both firms attributed their strong quarter to rebounding digital asset prices and a surge in trading activity.

Market sentiment improved on signs of U.S. legislative progress, including the approval of the GENIUS Act, and was further lifted by an Ethereum rally and growing expectations of U.S. Federal Reserve interest rate cuts.

But momentum has since stalled. Bitcoin slid below $95,000 on Saturday, its lowest level in six months and 25 percent off its Oct. 6 peak of $126,210.50. The market is now in "extreme fear" territory, according to market tracker CoinMarketCap.

Key headwinds include escalating U.S.-China trade tensions, fading hopes for the Fed's rate cut next month and a $100 million Ethereum hacking incident that's denting investor confidence. Some are now questioning whether a new crypto winter is beginning.

Trading activity has dried up as a result.

According to CoinGecko, the combined daily average trading volume on Upbit and Bithumb stood at $1.88 billion from Nov. 1 through Friday — the lowest level so far this year. The figure peaked at $7.8 billion in January, bottomed out at $2.2 billion in June, and has since hovered between $3 billion and $4 billion.

These developments are likely to deliver a significant blow to the operations of domestic cryptocurrency exchanges. Trading fees make up virtually all of their revenue — 98.2 percent for Dunamu and 98.3 percent for Bithumb.

In response, the exchanges have been rushing to list new cryptocurrencies in an effort to keep investors engaged.

According to digital asset analytics platform APYWA, from Jan. 1 to Friday, Korea's five major exchanges — Upbit, Bithumb, Coinone, Korbit and GOPAX — listed 391 tokens, up 47 percent from all of 2024. The pace of new listings has accelerated notably in the second half of the year.

Still, volumes remain weak as the market trades sideways.

"Without alternative revenue streams, exchanges will remain at the mercy of market volatility," an industry official said. "While the phased approval of corporate participation in the crypto market is seen as a positive signal, long-term sustainability will require regulatory reforms that allow for greater business diversification."