Korean Retail Investors Rewriting the Rules of Global Finance

South Korean retail investors are significantly shifting capital away from Tesla Inc. and into crypto-linked equities, signaling a broader trend of reallocation from U.S. tech stocks into digital asset proxies. In August alone, Korean investors sold $657 million of Tesla shares, marking the largest monthly outflow since early 2019 and contributing to a $1.8 billion sell-off over four months. Despite this, Tesla remains the top foreign stock in Korean retail portfolios, with holdings totaling $21.9 billion, although the gap between Tesla and competitors like Nvidia and Palantir is narrowing.

Capital is increasingly flowing into companies associated with the crypto ecosystem. Bitmine Immersion Technologies, viewed as a proxy for Ethereum, attracted $253 million in net inflows in August, with cumulative inflows from July and August reaching $512 million. This movement is not limited to a single firm; the top 50 net-bought foreign stocks among Korean retail investors now include crypto-related equities at 31.4%, a significant increase from 8.5% at the start of 2025. These figures underscore a structural reweighting of portfolios from traditional U.S. tech exposure to digital asset-linked opportunities.

The broader shift in retail investor behavior is evident in South Korea’s evolving market dynamics. With over 10.8 million Koreans trading cryptocurrencies, volumes in digital assets have surpassed those in local equities since late 2024. Younger investors, particularly those in their 20s, dominate crypto participation, which is also reflected in the higher proportion of crypto holdings compared to older demographics. This demographic shift is further amplified by policy developments, including discussions on the introduction of spot crypto exchange-traded funds and the potential inclusion of digital assets in long-term savings vehicles such as pensions.

Korean regulators have also been taking a more active role in shaping the crypto environment. The introduction of the Virtual Asset User Protection Act in July 2024 enhanced investor safeguards and fraud prevention measures, contributing to a more secure and transparent ecosystem. Additionally, the Bank of Korea has raised concerns about the systemic risks posed by stablecoins, noting their potential to disrupt monetary policy and financial stability. Regulatory scrutiny has also extended to exchanges, with 14 platforms, including KuCoin and MEXC, banned in late 2024 for noncompliance with registration requirements.

The shift in investor sentiment is also reflected in fund flows. The TSLL, a leveraged ETF offering double exposure to Tesla shares, saw record redemptions of $554 million in August. This outflow highlights a broader loss of confidence in leveraged exposure to traditional tech equities. Meanwhile, crypto-linked stocks and firms with exposure to blockchain infrastructure are gaining traction as alternative investment avenues.

South Korea’s growing influence in the global crypto market is evident in its transaction volumes, with the Korean won becoming the second-most-used fiat currency for digital asset trading after the U.S. dollar. The country is projected to reach a crypto trading volume of $663 billion in 2025, driven by robust domestic exchanges like Upbit and Bithumb, as well as a rapidly expanding retail base. Over 16 million South Koreans hold accounts with domestic exchanges—approximately 32% of the population—surpassing the number of individual stock investors. With new crypto accounts increasing by over 500,000 following the U.S. presidential election in late 2024, the momentum shows no sign of slowing.