Korean investors flock to "coin stocks," BitMine becomes the new favorite

Author: angelilu, Foresight News

The crypto trading frenzy in South Korea has quietly surged into the "stock market." The "kimchi premium" of yesteryear was once a spectacle that the global cryptocurrency market talked about with great enthusiasm. In this country of only 51 million people, Bitcoin trading volumes were enough to shake the global market. Although the government's strong regulation has made this premium phenomenon a thing of the past, the adventurous spirit inherent in Koreans has not faded; they are simply seeking new outlets.

Moreover, the main force behind this frenzy is not the large institutional players in South Korea, but the younger generation of retail investors betting on their futures. In this country of 51 million people, as many as 18 million are active in the digital asset market, accounting for more than one-third of the country's total population, and nearly a quarter of young people aged 20 to 39 view trading cryptocurrencies as their only chance to turn their lives around.

BitMine is the latest trading target

According to Bloomberg citing data from South Korea's securities custody agency, South Korean investors have poured a net $259 million into BitMine stocks since July, making BitMine the top overseas stock purchase in South Korea.

BitMine is a U.S. Bitcoin mining company supported by "King of Silicon Valley" Peter Thiel, which has recently transitioned from Bitcoin mining to adopting ETH as its financial strategy, currently holding over 1.15 million ETH, valued at over $4.96 billion. This makes it an important "vault" for holding ETH on Wall Street. Interestingly, Tom Lee, a key driver of bringing ETH to Wall Street, is also a director at BitMine.

Tom Lee is a Korean-American. After experiencing the bloody lesson of the LUNA coin crash, South Korean investors' enthusiasm 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 but also a call imbued with national sentiment. This subtle cultural identification 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 to buy BitMine's stocks?

Volatility may be the answer. Although cryptocurrencies are known for their extreme volatility, some retail investors may believe that participating through the stock market can provide a different risk exposure.

Backtesting shows that ETH's price rose from $2,500 to $3,800 in July, an increase of 52%. During this period, BitMine's stock BMNR rose from $46 on July 1 to a peak of $135, with a maximum increase of 193%.

However, as of the time of writing, ETH has risen to $4,300, the highest level since December 2021. Meanwhile, BMNR's price has only slightly rebounded to $58.98. Risk-seeking South Koreans seem to prefer more volatile investment options, even though this "roller coaster" rise and fall can cause countless retail investors chasing highs to fall from grace.

In fact, the direct trading volume of ETH is also significant, with South Korea's largest exchange Upbit recording an ETH trading volume of $111.1 billion for the entire month of July, with net inflows currently unquantifiable.

BitMine is just a microcosm of the "coin-stock" frenzy

However, this is not the first time South Koreans have rushed into "coin-stocks." When the stablecoin company Circle went public, it attracted the attention of South Korean investors, with a net buying amount of $450 million in the month of Circle's listing, pushing Circle's price-to-earnings ratio to 187 times, a figure far exceeding any reasonable valuation for traditional fintech companies.

This frenzy has also swept through the South Korean domestic market. The new government's crypto-friendly policies have filled retail investors with expectations, which is part of the reason why South Korea's composite stock price index has risen to a nearly four-year high. When the Bank of Korea announced the launch of a digital currency project (CBDC), retail investors sniffed out business opportunities. Stocks of companies involved in the project, such as Kakao Pay and LG CNS, seemed to rocket in 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 "crypto-related stocks" frenzy in South Korea is less a financial phenomenon and more a reflection of deeper social phenomena. It reflects how young South Koreans are urgently seeking non-traditional, high-risk breakthrough paths in an environment where traditional wealth accumulation channels are increasingly narrow.

As Dragonfly's Hadick warns: "When the premium disappears, investors will quickly sell off their stocks; these phenomena are usually short-lived." The valuations of "crypto-related stocks" driven up by emotion and speculation may essentially be a huge bubble. When the frenzy finally subsides, who is left swimming naked may only become clear at that time.