Korean investors attracted to low-priced cryptocurrencies... Reasons why coin stocks and coins are popular

Preference Phenomenon for Penny Coins Based on Actual Trading Data

When observing the cryptocurrency market, interesting phenomena can be discovered. Penny coins, with prices below 1,000 won, are recording unusually high trading volumes relative to their market capitalization or technological strength.

For example, comparing Solana(SOL) and Tether Finance shows a clear difference. Solana currently trades around 200,000 won with a market cap of 113 trillion won, whereas Tether Finance is around 700 won with a market cap of 2.3 trillion won. Assuming an investment of 1 million won, you could buy about 5 Solanas but approximately 1,300 Tether Finances.

Another noteworthy point is the trading turnover rate. Solana’s 24-hour trading turnover rate is about 0.11%, while Tether Finance’s is around 0.43%, about four times higher. This indicates that low-priced coins are relatively more active targets for short-term trading.

The Illusion Created by Psychological Biases

Behind these phenomena are various psychological factors.

The Illusion of Satisfaction from Quantity

Unit bias is the tendency to perceive greater value when the number of units is higher, even if the total amount is the same. Holding 1,300 coins versus 5 coins, for the same investment amount, psychologically feels more satisfying with the larger number.

Being Blinded by Recent Performance

Recency bias is also a key factor. Penny coins tend to be highly volatile, often surging over 2-3 days, leading investors to mistakenly believe these short-term gains will continue. They overlook past downward patterns and overvalue current upward trends.

The Trap of Comparing with Other Coins

Anchoring effect creates unintended reference points. After seeing Bitcoin priced over 10 million won, Ethereum at around 5 million won seems relatively cheap. Similarly, low-priced coins appear very affordable next to high-priced ones. This can lead to errors that ignore actual factors like issuance volume, market cap, and technology.

The Psychology of Quick Gains

Penny coins react dramatically to small price changes. While Bitcoin’s fluctuations of several million won are hard to perceive, penny coins can generate hundreds of times profit with just a few hundred won change. This makes them attractive to investors seeking quick riches. Cases like Dogecoin, which achieved thousands of times returns from its lowest price, further stimulate this desire.

Investing out of Fear of Falling Behind

FOMO( (Fear of Missing Out) and herd mentality also play roles. The anxiety of missing out on a newly listed low-priced coin that might rise later, and the tendency to jump into popular coins rather than making rational decisions, influence investment choices.

Structural Characteristics of the Korean Market

Psychological factors are not the only reason. The structure of the Korean cryptocurrency market also reinforces the preference for penny coins.

Major domestic exchanges still hold over 60% of the market share, limiting capital flow. This results in the Kimchi Premium phenomenon, where domestic prices are higher than overseas. This is especially pronounced in low-liquidity penny coins. Domestic investor demand concentrates on certain low-priced coins, inflating their prices.

Many coins listed on domestic exchanges are what’s called “Kimchi coins,” with most trading volume concentrated domestically. They react sensitively to local investor sentiment and issues, and some penny coins exhibit high trading volumes driven by these psychological and structural factors, making them difficult to explain with fundamentals alone.

The Answer Lies in Actual Value

From the analysis so far, it’s clear that the preference for penny coins generally arises from irrational factors. When considering trading volume, market cap, circulating supply, and intrinsic value, low-priced coins are not necessarily better investments.

High potential returns alone do not justify choosing penny coins. Their high volatility makes long-term stable profits difficult to achieve.

Therefore, when selecting cryptocurrencies, focus on actual investment value rather than face value. Coins with little intrinsic value are not necessarily cheap just because their price is low, and coins with solid technology and ecosystems may be undervalued even at higher prices in the long run.

Advice for Wise Cryptocurrency Investment

) Don’t Just Look at Price

Just because a stock’s price is low doesn’t mean it’s undervalued, and the same applies to cryptocurrencies. Since cryptocurrencies can be divided into small units, the total investment amount is more important than the price per coin. It’s essential to analyze technical and fundamental factors to determine if the current price is appropriate.

Follow Risk Management Rules

To profit from the high volatility of penny coins, set stop-loss and take-profit orders in advance. Using trailing stops### can help maximize trend exploitation while limiting risks.

( Diversify Your Portfolio

Avoid investing all your funds solely in cryptocurrencies. Combining assets like USD, government bonds, and gold, which have low correlation with cryptocurrencies, can help mitigate losses during market crashes.

) Monitor Market News

Cryptocurrencies have low intrinsic value and are sensitive to external events. Bitcoin’s movements significantly influence the entire market, so regularly checking related news is crucial.

The Beginning of Wise Choices

Ultimately, choosing penny coins solely because they are low-priced is a trap of psychological biases and market structure. For novice investors, it’s wise to start with cryptocurrencies with proven long-term value like Bitcoin or Ethereum. Even experienced investors should base their choices on technology and fundamentals rather than face value. This is the way to achieve stable long-term profits.