Upbit's Trading Volume Collapsed… 'Crisis Theory' Spreads Amid Expansion of New Listings

▲ Is Upbit's heyday over?/AI generated image ©

Upbit, which once saw tens of trillions of won in daily transactions, is reportedly seeking a breakthrough through an 'listing drive' amid a sharp decline in trading volume and regulatory pressure. While it maintains its position as the No. 1 exchange in Korea, evaluations that 'Upbit's growth formula has begun to falter' are emerging in the market.

According to industry sources on the 14th, Upbit's trading volume has been on a clear downward cycle since the cryptocurrency super boom in 2021. During the frenzy of Bitcoin (BTC) and altcoins, Upbit absorbed most of the domestic market's transactions, virtually establishing a monopoly. However, trading volume plummeted after global tightening and the Terra-Luna incident in 2022, and after a brief recovery driven by expectations for a US Bitcoin spot ETF in 2024, it has entered a cooling phase again. Analysis suggests that recently, there have been many days where the daily trading value remains at the level of $1 billion to $4 billion.

In particular, there is an assessment that changes in market structure are burdening Upbit. In the past, the domestic retail investor-centric market saw a repeated pattern of 'Kimchi Premium' and short-term altcoin surges, but recently, global capital is shifting towards US Bitcoin spot ETFs and institutional-centric markets. Domestic investors are also showing a trend of partly moving towards US stocks and overseas exchanges based on stablecoins rather than short-term trading. Indeed, Upbit's trading volume repeatedly shows a pattern of temporarily exploding only during periods of surging transactions for specific altcoins or XRP (Ripple).

Analysis suggests that Upbit's recent proactive stance in expanding new listings is not unrelated to this slowdown in trading volume. In the market, there's a view that Upbit is reverting to an 'altcoin liquidity hub' strategy, as short-term surges and explosions in trading volume repeatedly occur immediately after new coin listings. Indeed, some newly listed assets climbed to the top ranks in daily trading volume, briefly boosting the subdued exchange atmosphere. The industry also assesses that 'Upbit is actively utilizing demand for new themed coins and meme coins to recover trading volume.'

Regulatory risk is also a burden for Upbit. Financial authorities have recently moved to strengthen best practices for virtual asset trading support and listing review standards, pressuring exchanges for transparency in their listing and delisting procedures. As sharp fluctuations in specific coins and volatility issues immediately after listing repeatedly occur, the demand for investor protection is also growing. Furthermore, the rapid restructuring of the US and European markets into institutional-centric structures means that the influence of the domestic exchange-centric market is relatively diminishing, which is also considered a concern for Upbit.

However, there is a counterargument that it is difficult to immediately conclude that this crisis will lead to a slump, given that Upbit remains the undisputed leader in the domestic market. Upbit still accounts for most of the domestic KRW transactions, and its impact from new listings and the effect of liquidity concentration are overwhelming. The market also predicts that if US interest rate cuts and an altcoin bull market fully resume in the future, Upbit's trading volume could also recover quickly. Ultimately, whether Upbit can create a new growth strategy suitable for the 'institutional era' is emerging as a key variable that will determine the future landscape of the domestic cryptocurrency market.

*Disclaimer: This article is for investment reference only and we are not responsible for any investment losses based on it. The content should be interpreted for informational purposes only.*