Why do South Korean Cryptocurrency Exchanges Only List a Few Tokens?
Originally published on: CCN
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January 30, 2018
Many investors, especially traders outside of the South Korean cryptocurrency exchange market, remain curious as to why local cryptocurrency exchanges like Bithumb and Korbit only list a few cryptocurrencies at a time.
Bithumb, the country’s largest cryptocurrency exchange which generated more than $300 million in profits from fees in 2017, has only 12 cryptocurrencies listed on its platform. Korbit, the third largest cryptocurrency exchange in the local market, has less cryptocurrencies implemented than Bithumb.
South Korean cryptocurrency exchanges are extremely cautious when integrating news cryptocurrencies because they carefully analyze the demand for certain cryptocurrencies in the market. As shown in the large premiums in the local market, there exists a significant amount of demand for cryptocurrencies but less supply in the South Korean market.
Consequently, investors purchase cryptocurrencies with rates higher than global average rates, because of the lack of supply of cryptocurrencies.
Specifically, prior to adding Qtum and Zcash, Bithumb was said to have done several months of risk evaluation and analysis, to ensure that the demand for the two cryptocurrencies can be sustained in the long-term.
South Korean investors are not interested in all the cryptocurrencies in the market. On Bithumb for instance, on Bithumb, EOS has a larger daily trading volume than bitcoin, Bitcoin Cash, Litecoin, Dash, Monero, and Zcash combined. Hence, for Bithumb, listing a cryptocurrency that is more popular than 7 major cryptocurrencies combined is more beneficial for the company than adding support for 7 cryptocurrencies.
Also, the South Korean market is restricted in the sense that foreigners are not allowed to trade fiat-to-cryptocurrencies any longer. Even before the foreigner trading ban was imposed on January 20, foreigners were limited by cryptocurrency exchanges in trading cryptocurrencies for fiat currencies.
As such, if a certain cryptocurrency on local exchanges have low demand but large supply, it becomes difficult for exchanges to maintain order books and continue supporting that specific cryptocurrency.
In other regions, miners contribute significant amounts of cryptocurrencies to exchanges, increasing the liquidity of most cryptocurrencies. In the South Korean market, the supply for almost every cryptocurrency in the global market is small because there are no large-scale mining centers. Since foreigners and overseas miners cannot bring in cryptocurrencies into the local market, the supply has to come from the local market.
In December, several miners from China were arrested in South Korea for selling bitcoin and other cryptocurrencies they have mined in China in the South Korea cryptocurrency market.
If a cryptocurrency exchnage in South Korea prematurely adds a cryptocurrency that has low supply and demand, it realistically will not be able to fill the order books for that specific cryptocurrency and potentially create serious problems for themselves and for local investors.
Due to the small amount of cryptocurrencies listed by South Korean exchanges, the debut of UpBit was highly anticipated by local investors and within months, it has become the second largest cryptocurrency exchange in the market behind Bithumb.
UpBit, operated by KakaoTalk and KakaoPay operator Kakao’s subsidiary company Dunamu, has a strategic partnership with Bittrex that allows the platform to list all cryptocurrencies listed on Bittrex. To this date, UpBit remains as the only cryptocurrency exchange in South Korea with support for more than 100 cryptocurrencies.
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