The cryptocurrency trading craze in South Korea has quietly flowed into the 'stock market.' The 'kimchi premium' of the past was once a phenomenon that intrigued the global cryptocurrency market. This country, with a population of only 51 million, once saw Bitcoin trading volumes large enough to shake the global market. Although the government's strong regulation has made this premium phenomenon a thing of the past, the inherent risk-taking gene in South Koreans has not faded; they are just looking for new outlets.
And the main force behind this craze is not the large institutional giants in South Korea but the younger generation of retail investors betting on the future. In this country with a population of 51 million, as many as 18 million people are active in the digital asset market, accounting for more than one-third of the country's total population, with nearly a quarter of young people aged 20 to 39 viewing cryptocurrency trading as their only chance to turn their lives around.
BitMine is the latest trading target.
According to data cited by Bloomberg from South Korea's securities custodian, South Korean investors have poured a net amount of $259 million into BitMine stock since July, making BitMine the number one choice on South Korea's overseas stock purchase list.
BitMine is a U.S. Bitcoin mining company backed by 'Silicon Valley King' Peter Thiel, which has recently transitioned from Bitcoin mining to adopting ETH as its financial strategy, currently holding over 1.15 million ETH, worth more than $4.96 billion. This makes it an important 'vault' of ETH on Wall Street. Interestingly, Tom Lee, a significant proponent of bringing ETH to Wall Street, is also a director at BitMine.
Tom Lee is a Korean-American. After experiencing the bloody lessons from the collapse of LUNA, the enthusiasm of South Korean investors for risk assets has not waned. At this time, the emergence of a 'fellow countryman' from overseas who has achieved great success in the financial world undoubtedly garners high trust and attention. For South Korean retail investors, this is not just the perspective of an industry expert; it is also a call with national sentiment. This subtle cultural identity further reinforces their confidence and enthusiasm for the crypto market.
Why not buy ETH directly?
A key question arises: Since they are optimistic about Ethereum, why not buy ETH directly instead of going around in a big circle to buy BitMine's stock?
Volatility might be the answer. Although cryptocurrencies are known for their extreme volatility, some retail investors might think that participating through the stock market offers a different risk exposure.
Looking at the actual backtest, the price of ETH rose from $2,500 to $3,800 in July, an increase of 52%. During this period, the price of BitMine stock BMNR rose from $46 on July 1 to a peak of $135, with a maximum increase of 193%.
As of the time of writing, ETH has risen to $4,300, the highest level since December 2021. Meanwhile, the price of BMNR has only slightly rebounded to $58.98. Risk-loving South Koreans seem to prefer choosing investment products with even higher volatility, even though this 'roller coaster' rise and fall can cause countless retail investors chasing highs to fall from the cloud.
However, the direct trading volume of ETH is not low either. In July alone, the trading volume of ETH on South Korea's largest exchange, Upbit, was $111.1 billion, and net inflows are currently difficult to quantify.
BitMine is just a microcosm of the 'coin stock' craze.
However, this is not the first time South Koreans have rushed into 'coin stocks.' When the stablecoin company Circle went public, it already attracted the attention of South Korean investors, with a net purchase of $450 million in the month of Circle's IPO, pushing Circle's price-to-earnings ratio up to 187 times, a figure that far exceeds any reasonable valuation for traditional fintech companies.
This frenzy has also swept through the local market in South Korea. The new government's crypto-friendly policies have filled retail investors with anticipation, which is also part of the reason for pushing the Korean Composite Stock Price Index to a nearly four-year high. When the Bank of Korea announced the launch of a digital currency project (CBDC), retail investors sensed an opportunity. Companies like Kakao Pay and LG CNS, which are involved in the project, saw their stock prices seemingly rocket within a short period. Kakao Pay's stock price doubled in just one month, while LG CNS followed closely behind, soaring nearly 70%.
When the frenzy finally subsides.
The craze for 'crypto-related stocks' in South Korea is more a reflection of deep-seated social phenomena than a financial phenomenon. It reflects how young people in South Korea are eagerly seeking non-traditional, high-risk breakthrough paths in an environment where traditional wealth accumulation channels are increasingly narrow.
As Dragonfly's Hadick warned: 'When the premium disappears, investors will quickly sell their stocks, and these phenomena are usually temporary.' The valuations of 'crypto-related stocks' driven by emotions and speculation could essentially be a huge bubble. When the frenzy finally subsides, who will be caught naked will perhaps only be revealed then.
