Author: Zhou, ChainCatcher

Last Sunday, NVIDIA CEO Jensen Huang flew to Seoul to have dinner with SK Group Chairman Chey Tae-won and SK Hynix CEO Lee Seok-hee. After the meal, NVIDIA and SK Hynix officially announced a multi-year technology cooperation agreement, and Huang publicly stated that AI company stock prices are currently very low and that the shortage of memory chips will last for several years.

However, the next day, Monday, the KOSPI quickly dropped more than 8.8%, with Samsung Electronics plunging 10% at one point, and SK Hynix falling nearly 10%. The Korea Exchange triggered a circuit breaker, and trading was suspended across the market, setting the largest single-day drop since this bull market began..

South Korean President Lee Jae-myung stated that the Korean stock market is still undervalued. Today, at the close of trading, the KOSPI surged 8.18%, with SK Hynix rebounding 15.91% in a single day and Samsung Electronics soaring 8.97%.

According to Goldman Sachs data, year-to-date, foreign investors have net sold a total of $75 billion in South Korean stocks, with global investors selling Korean stocks at an unprecedented rate. In contrast, local South Korean retail and institutional investors have collectively net bought about $69 billion during the same period, continuously absorbing the selling pressure from foreign capital.

Meanwhile, the balance of financing in the South Korean stock market has surged to a historical record, with large amounts of capital flowing into the stock market through alternative routes.

South Korean Cryptocurrency Funds Shift Towards the Stock Market: Holdings Halved, Trading Volume Vanished by 80%

South Korea was once one of the markets with the highest density of cryptocurrency retail investors and the most extreme emotions. Upbit's spot trading volume once ranked second in the world, second only to Binance. The prices of cryptocurrencies such as Bitcoin on South Korean exchanges have long been about 10% higher than those on other global exchanges. This price difference is known as the kimchi premium and serves as the most intuitive metric for the FOMO sentiment of South Korean retail investors.

Starting in 2025, this group of funds began a significant systemic migration. Data shows that the total value of cryptocurrency holdings of South Korean investors dropped from about $83.3 billion in January 2025 to about $41.4 billion in February 2026, a decline of over 50%. During this period, Upbit's average daily trading volume fell from about $9 billion in December 2024 to less than $1.8 billion in November 2025, a contraction of nearly 80%.

At the same time, the South Korean composite index KOSPI has risen sharply since its low in April 2025, accumulating a total increase of over 28%, with the balance of financing reaching a record 380 trillion won by the end of May this year. The balance of personal credit loans from the five major banks surged to over 106 trillion won. Many investors, who were once active in meme coins and altcoins, have turned to leveraging semiconductor stocks.

This transition has already permeated into South Koreans' daily lives. Office workers check stock prices on the subway or in bathroom stalls, elderly people discuss Samsung's trends while queuing at supermarkets, and the number of new accounts for minors under 18 has surged nearly tenfold year-on-year. At the shareholder meetings of major publicly listed companies like Samsung Electronics, it is common to see shareholders who are elementary students or even preschool children. Young parents are popular for opening stock accounts for their children on the day of their birth, buying semiconductor stocks.

According to KB Securities analysis, Samsung Electronics ranked first in the number of stocks gifted to minors through stock gift services around Children's Day this year, accounting for 56.3% of the total.

South Korean Stock Investors Are Leveraging Retirement Funds and Credit Loans

Behind this wave of capital migration are three forces at work simultaneously.

The first is that the industrial narrative is strong enough. Samsung Electronics' operating profit is expected to soar 756% year-on-year in the first quarter of 2026, setting a new record; SK Hynix's revenue is projected to grow 198% year-on-year in a single quarter, breaking records for four consecutive quarters. The explosive demand for global AI computing power has provided real support for the fundamentals of these two companies for a considerable period of time. During his visit to South Korea, Huang clearly stated that there is a shortage in nearly every aspect of the industry, from wafers to packaging to silicon photonics, and this situation will continue for several years.

The second factor is that the government is actively bullish. The Lee Jae-myung government has set a target of 5000 points for the Korean stock market, amended commercial laws requiring listed companies to cancel repurchased treasury stocks, and promoted tax reforms on dividends, turning the wealth effect into a component of governance legitimacy. On the day of the market circuit breaker, Lee still stated at a press conference commemorating his one-year anniversary that the stock market is undervalued. Such policy signals provide a layer of psychological security for retail investors who have experienced the bankruptcies of cryptocurrency exchanges and the collapse of Terra/Luna.

The third factor is that friction on the cryptocurrency side is accumulating. A 22% cryptocurrency gain tax has been confirmed to take effect in January 2027, and regulators are simultaneously advancing new anti-money laundering rules. The second largest exchange, Bithumb, has been subjected to a six-month partial business suspension penalty, raising the entry threshold for cryptocurrencies, while the leverage threshold for the stock market has relatively decreased.

It is worth mentioning that data shows that nearly one-third of the financing balance held by the elderly population over 60 years old, with this group's financing debt doubling within a year from about 3.95 trillion won to 8 trillion won, including many retail investors who suffered losses and withdrew cash value from life insurance policies to invest in the market. 40% of retail investors under 30 are using over three times leverage, with some investors cashing out through consumer loans and credit cards to increase their positions.

This demographic structure closely resembles that of the peak entry structure during the 2021 cryptocurrency bull market, composed of non-professional investors driven by wealth narratives. They are betting on a single track with leverage beyond their risk tolerance, choosing to believe that they are facing a once-in-a-lifetime opportunity.

Kimchi Premium Approaches Freezing Point

Ultimately, the underlying logic of South Koreans trading cryptocurrencies is fundamentally no different from current stock trading. High acceptance of technology, an extremely competitive social atmosphere, and almost closed channels for social mobility have together shaped a retail investor group that has a natural preference for high-volatility assets.

Moreover, the movements of South Korean retail investors in and out of the market have long been an early signal of global high-risk preference retail capital flows.

In the major global cryptocurrency markets, the U.S. has entered an institution-dominated phase, with annual inflows into Bitcoin spot ETFs exceeding $150 billion at the beginning of 2026, concentrating pricing power among institutions. Hong Kong and Singapore are focused on compliant infrastructure and stablecoin frameworks, with relatively limited retail participation. Retail investors in Southeast Asia are active but fragmented, and the regulatory environment is relatively unstable.

South Korea is almost unique in possessing high retail density, a strong speculative culture, centralized exchange infrastructure, and extreme sensitivity to global macro narratives.

However, Tiger Research pointed out that The South Korean cryptocurrency market is undergoing a power shift. The era dominated by retail investors is ending, and traditional financial institutions have seized key infrastructures before regulatory clarity.

In the past six months, the total trading volume of South Korea's five largest cryptocurrency exchanges has decreased by about 48% year-on-year. The kimchi premium has also consistently narrowed from a high point of about 10% and is currently even dropping to negative values.

Financial reports show that Upbit operator Dunamu saw a year-on-year revenue decline of about 10% in 2025, with profits plummeting by approximately 78% in Q1 2026.

Image Source:RootData

Despite this, Hana Bank still acquired a 6.55% stake for about $720 million, with Hanwha Investment Securities increasing its stake to 9.84%, while Samsung Securities, Samsung SDS, and Samsung Card jointly invested over $400 million to acquire a 4% stake in Dunamu.

Future Assets acquired over 90% of Korbit for about $100 million, while Korea Investment Securities and OKX Ventures jointly took nearly 40% equity in Coinone.

These traditional giants view exchanges as strategic springboards for STOs, stablecoins, and custody businesses.

Analysts say that these acquisition moves are more about designing regulation than simply seizing market share—the institutions are occupying advantageous arrangements before regulatory decisions are made, which will then influence the shape of the final framework.

Currently, there are 150 institutions participating in the South Korean cryptocurrency market, with 196 partnerships, but no single hub has gained dominant control. Even the strategies of overseas projects entering the field are changing, with Solana collaborating with Shinhan Card and Avalanche partnering with Future Assets, shifting the focus from retail communities to financial institutions.

On the policy level, the South Korean government has proposed in its 2026 economic growth strategy to promote the landing of spot ETFs for digital assets such as Bitcoin this year and to accelerate the legislative process for the second phase of digital assets overseen by the Financial Commission.

Conclusion

The speculative culture in South Korea has never disappeared, but the current stock market leverage boom has diverted some cryptocurrency funds, while South Korea's cryptocurrency market is undergoing a trend of "retail exit, institutions entering."

When the KOSPI truly begins to de-leverage, where those high-risk preference capitals will seek their next exit is a question worth continuous tracking for the cryptocurrency market.