Where Did the Money Come From? Investigating Sources of Bitcoin Investment in South Korean Crypto Market

초록

This paper investigates the potential sources of funds invested in cryptocurrency market. This is to understand the potential transmission of systemic risk from the cryptocurrency market to traditional capital markets, which might threaten financial safety regulations. Using the daily Bitcoin trading data from 2010 to 2020 traded in Korea, we find a regime change in September 2017 when the trading volume hits the peak. Pre-2017 September data yields positive and significant relationship between Bitcoin and KOSPI trading volume, but post-2017 data provides negative and significant relationship. With such results, we can conjecture that, in the early stage of Bitcoin market development, the successful investment stories in Bitcoin market increase the total capital with high-risk profile. With the popularity of Bitcoin investment, that is, risk tolerance of equity investors also increases. Later, on the other hand, the capital with high-risk profile flew from the traditional financial market, KOSPI to Bitcoin market. ©2025 GMP Press and Printing.

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