Can Bithumb's no-fee policy be game changer in crypto market?

A customer observes a Bitcoin price chart at a Bithumb customer center in Seoul, Aug. 23. Newsis

Korea's cryptocurrency exchange Bithumb has taken the unprecedented step among the nation's top exchanges to waive all transaction fees. This strategic move is viewed as Bithumb's attempt to significantly increase its market share in a domestic landscape largely dominated by Upbit.

According to sources in the cryptocurrency market, Bithumb began its zero-fee policy for all supported virtual assets starting at 6 p.m. on Wednesday. As a result, Bithumb's trading fees, which previously varied between 0.04 percent and 0.25 percent, have now dropped to zero.

The decision is particularly notable as the exchange has essentially given up its primary source of revenue. Furthermore, Bithumb reported an operating loss of 3.4 billion won ($2.5 million) in the second quarter of this year. It is understood that Bithumb prioritized the expansion of its customer base over continuing to collect fees, especially given its steadily declining revenue.

The new policy immediately captured the attention of investors. As of 3 p.m. on Friday, Bithumb's transaction volume over the past 24 hours reached 467.6 billion won, accounting for over 25 percent of all transactions in the domestic cryptocurrency market. This caused Upbit's dominance, which had remained in the 90 percent range for a while, to dip to around the 70 percent mark.

The zero-fee policy was devised two months ahead of Bithumb's 10th anniversary. The exchange signaled its intention to adopt even more aggressive strategies to enhance user accessibility.

However, market watchers are raising concerns about the sustainability of this approach, given the exchange's struggles with mounting deficits during the so-called crypto winter that has spanned the last two years.