"Commission business has reached its limit"...The fear of a trading cliff shakes Upbit and Bithumb

▲ Upbit /AI generated image ©

Upbit, once ranked second in the global spot trading market, is now facing dual pressure from a sharp decline in trading volume and deteriorating profitability. As funds shift to the domestic stock market and the exchange's revenue structure remains commission-centric, a sense of crisis is growing across the industry.

According to CoinGecko data as of May 25, Upbit's 24-hour trading volume was approximately $694.85 million. At the same time, Bithumb recorded about $429.56 million. Upbit's trading volume decreased by 37.4% compared to the previous day, and Bithumb's also decreased by 20.3%. In the global centralized exchange rankings, Upbit is said to be at 15th place, and Bithumb at 49th.

The sluggish performance of domestic exchanges is also evident. According to the Financial Supervisory Service's electronic disclosure, Dunamu's revenue in the first quarter of this year was 234.6 billion won, a 54.6% decrease from the same period last year, and operating profit was 88 billion won, down 77.8%. Net profit also decreased by 78.3% to 69.5 billion won. During the same period, Bithumb's revenue fell by 57.6% to 82.5 billion won, and it turned to a deficit, recording a net loss of 86.9 billion won.

A particular problem highlighted is that exchanges' business structures are still excessively reliant on commission revenue. As of the first quarter of this year, commission revenue accounted for 97.49% of Dunamu's revenue and 99.99% of Bithumb's. This means that if trading volume decreases, performance is directly impacted. Industry analysis also suggests that domestic exchanges have not adequately responded to global market changes expanding around institutional investment, derivatives, and ETFs.

In the past, Upbit reached second place globally after Binance, recording an 8.1% share of global spot trading in 2023, and Bithumb also ranked high in global trading volume in 2017 and 2019. However, the current domestic market is experiencing a significant contraction in investment sentiment due to the strong KOSPI and virtual asset taxation issues. The industry believes that the decline in trading continues as personal investment funds shift to the stock market and the burden of virtual asset taxation, scheduled to be implemented next year, adds to the pressure.

Exchanges are also working to find new breakthroughs. Dunamu is expanding its financial infrastructure business based on its own blockchain network, 'GIWA Chain,' while Bithumb is attempting to enter overseas markets and diversify its data business. However, the prevailing assessment within and outside the industry is that there is still a lack of clear new revenue sources that can replace trading commissions.

*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.*