[Bitcoin Now] Upbit and Bithumb Plunge Sharply

Virtual Asset Exchanges See Declining Profitability Amid Decreased Trading

Upbit's Net Profit Fell by About 28% Last Year

Heavy Reliance on Transaction Fees... Urgent Need for Revenue Diversification

As the cold spell in the digital asset market continues, the overall profitability of virtual asset exchanges has also deteriorated. Given that transaction fees account for over 90% of their earnings under the current structure, trading volume has a significant impact, making it urgent for these exchanges to diversify their sources of revenue.

According to the Financial Supervisory Service's electronic disclosure system on April 14, Dunamu, which operates the virtual asset exchange Upbit, posted a consolidated net profit of 708.9 billion won last year. This figure represents a 27.9% decrease compared to the same period in the previous year. During the same period, Dunamu's revenue was 1.5578 trillion won and operating profit was 869.3 billion won, down 10% and 26.7%, respectively, from the previous year. A Dunamu official explained, "The decrease in performance is analyzed to be a result of declining trading volumes in the digital asset market due to the global economic slowdown."

Bithumb's net profit for last year was 78 billion won, down 51.8% year-on-year. However, both its revenue and operating profit increased. Last year, Bithumb's revenue rose 31.2% to 651.3 billion won, and its operating profit increased 22.3% to 163.5 billion won.

Coinone's net profit last year was 2.7 billion won, a sharp decrease from 15.6 billion won the previous year. Revenue increased 3% year-on-year to 45.5 billion won, but the company continued to record an operating loss of 6.3 billion won.

The deterioration in profitability at virtual asset exchanges can be attributed to a decrease in trading volume due to market contraction, as well as a decline in the value of virtual assets. According to the Korea Financial Intelligence Unit (FIU), the daily average transaction amount at 18 exchanges during the second half of last year was 5.4 trillion won, a 15% decrease compared to the first half. The domestic virtual asset market capitalization stood at 87.2 trillion won at the end of last year, down 8% from the end of June.

For domestic virtual asset exchanges that are heavily dependent on transaction fee income, a decrease in trading volume inevitably leads to a decline in performance. Most of the exchanges' revenue comes from transaction fees, which are directly linked to trading volume. In Dunamu's case, revenue from transaction platform fees last year was approximately 1.5307 trillion won, accounting for 98.26% of total revenue. Fee income declined by 10.4% compared to the previous year. Last year, Bithumb's fee revenue was 636.3 billion won, making up 97.69% of its total revenue. Although this ratio decreased from 99.94% the previous year, it still represents an overwhelming majority.

Valuation losses resulting from the decline in virtual asset prices have also contributed to the deterioration in profitability. As the value of virtual assets (proprietary assets) held by exchanges fell, this was recognized as non-operating losses on the books, negatively impacting net profit. Both Bithumb and Coinone attributed the decrease in net profit, despite revenue growth, to the impact of valuation losses from falling virtual asset prices, which were reflected as non-operating expenses.

An industry official commented, "Transaction fees are the only source of profit, but as the market contracts and trading volume declines, marketing expenses and regulatory compliance costs continue to rise due to intensified competition, all of which are affecting the profitability of virtual asset exchanges."

Diversifying revenue streams is desperately needed, but the situation is not favorable. Unlike overseas exchanges, Korean exchanges are restricted by regulations from expanding into additional profit sources such as derivatives trading, staking (virtual asset deposit services), and corporate services. Hyunkyung Yang, a researcher at iM Securities, noted, "Korean virtual asset exchanges derive 98% of their revenue from trading, with only 2% from other sources, showing little diversification. In contrast, the US virtual asset exchange Coinbase demonstrates diversification with 51% of revenue from trading, 22% from stablecoins, 14% from blockchain rewards, 6% from lending and interest, and 8% from ETFs and subscriptions."

This content was produced with the assistance of AI translation services.