The cumulative trading volume of perpetual futures on overseas cryptocurrency exchanges, based on Korean stocks and stock indices such as SK Hynix and Samsung Electronics, surpassed 300 trillion won within six months of their launch. These are high-risk products that allow leverage of up to 200 times. As trading in domestic single-stock leveraged ETFs (Exchange-Traded Funds) plummeted following the announcement of countermeasures, demand has shifted to perpetual futures, raising concerns about further investor losses.
According to Web3 research and consulting firm Tiger Research on the 20th, the cumulative trading volume of Korean stock- and index-based perpetual futures products reached 307 trillion won from February this year through August last month. Considering that trading volume was around 10 billion won when related products were launched in February last month, this represents rapid growth in just six months.
Unlike regular futures, perpetual futures are derivatives that can be traded without a fixed expiration date. Investors can bet on price increases or decreases and utilize leverage without directly holding the underlying asset. Currently, perpetual futures traded on overseas cryptocurrency exchanges are linked to underlying asset price fluctuations with leverage ranging from 10 times to a maximum of 200 times.
While products based on cryptocurrencies have dominated the market until now, analysts say demand has grown since the launch of Korean stock-related perpetual futures products this year. According to Eugene Investment & Securities, Korean individual stock perpetual futures, excluding indices and ETFs, are centered on three stocks: SK Hynix, Samsung Electronics, and Hyundai Motor. Based on 11 major global cryptocurrency exchanges, the cumulative trading volume of products related to these three stocks reached approximately $176 billion (approximately 233 trillion won) from February 19 last month to August 8 last month. Among these, trading volume for SK Hynix-related products accounted for 92% of the total at $161 billion (approximately 213 trillion won).
An industry official stated, “While domestic investors have been focused on single-stock leveraged ETFs, domestic and international investors are rapidly shifting to perpetual futures,” adding, “Even outside Korea, one can track SK Hynix and Samsung Electronics with 10x or 20x leverage, raising concerns about investor losses.”
In fact, according to the Financial Supervisory Service, the average daily trading volume of single-stock leveraged ETFs decreased from 11.7 trillion won before the financial authorities announced supplementary countermeasures on July 30 last month to around 800 billion won after implementation.
Meanwhile, as the perpetual futures market grew on overseas exchanges that allow 24-hour trading and are not subject to domestic regulations, financial authorities issued an investor warning. This is because losses for investors can expand rapidly given the high leverage of these products. For example, according to financial authorities, a product linked to the Korean stock index with 150x leverage could result in the forced liquidation of the entire investment if the index moves just 0.66% in the opposite direction during trading hours.
Nam Gil-nam, Senior Research Fellow at the Capital Markets Institute, stated, “The high-leverage perpetual futures market for Korean-related stocks such as Samsung Electronics and SK Hynix listed on overseas cryptocurrency exchanges is growing rapidly, increasing the need for investor protection,” adding, “For stock and stock index ETF products that are not cryptocurrencies, financial investment regulations and investor protection rules are necessary.”
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