Small crypto exchanges face liquidity cliff as daily Bitcoin trades fall below 1 BTC

A deepening slump in South Korea's digital asset trading is pushing smaller exchanges toward a liquidity cliff. Weak crypto prices and a rallying domestic stock market have combined to drive investors toward high-volume domestic platforms or overseas exchanges that offer derivatives trading.

According to CoinGecko, the five major won-denominated exchanges — Upbit, Bithumb, Coinone, Korbit and Gopax — recorded a combined daily average trading volume of 597.8 billion won ($404 million) from July 1 to Tuesday. That amounts to just 1.59% of the Kospi market's daily average trading volume of 37.67 trillion won over the same period.

The trading drought has left Bitcoin volumes at smaller exchanges nearly dry. Gopax, the lowest-ranked of the five by market share, saw daily Bitcoin trading volume fall below 1 BTC on every day this month except July 10.

The gap is stark even compared with fourth-ranked Korbit, where daily Bitcoin trading ranged from a minimum of roughly 6 BTC to a maximum of 26 BTC through Wednesday.

Market observers attribute the trend to a confluence of weak digital asset prices and a strong domestic equity market drawing investment funds away from crypto.

Yang Hyeon-gyeong, a researcher at iM Securities, said that since a large-scale liquidation event on Oct. 10 last year, domestic digital asset trading volume had fallen sharply while AI-related stocks surged on the local bourse. "The weakness in the digital asset market and the concentration of funds into AI stocks have weighed on trading volume at domestic exchanges," she said.

There are also signs that domestic investors are migrating to overseas exchanges in search of derivatives, which carry greater volatility than spot trading. "Digital asset investors tend to prefer futures over spot trading because of the volatility," Yang said. "Many appear to be buying stablecoins on Upbit, then moving them to Binance or Hyperliquid to trade futures or tokenized stocks — effectively moving funds offshore."

The prolonged trading slump is expected to deepen the concentration of activity at major platforms such as Upbit and Bithumb. Exchanges with higher liquidity can reduce "slippage" — the gap between an expected execution price and the actual fill price — giving them a structural advantage over smaller rivals.

While smaller exchanges can temporarily boost volumes through fee discounts or promotional events, analysts say such measures fall short of addressing the underlying liquidity problem. "Trading volume does pick up temporarily when exchanges run promotions, but it is hard to see that as a lasting effect," Yang said. "The structural pattern is one where funds first concentrate at large domestic exchanges and then flow out to global platforms — it is difficult to say the overall situation for domestic exchanges is good."

Gopax said its current priority is operational normalization rather than expanding trading volume or pursuing new projects. "With the market reshaping rapidly, the most important thing right now is normalizing operations — including repaying Gopax's high-yield product obligations — and strengthening our fundamentals," a company official said. "Pursuing new businesses is a follow-up task to be reviewed later."