Bitcoin Trades Below Global Prices In South Korea, Erasing Long-Standing ‘Kimchi Premium’ – Here’s Why

Ash Tiwari

Last Updated: October 18, 2024 2:00 am

3 mins read

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Bitcoin (BTC) is trading slightly lower in South Korea compared to the global cryptocurrency markets due to a reverse ‘kimchi premium,’ not seen since October 2023.

Reverse ‘Kimchi Premium’ Makes Bitcoin Cheaper In South Korea

According to a report by The Korea Times, there is a price differential of more than $500 between Bitcoin’s price in South Korea and global markets. Analysts attribute this to a negative ‘kimchi premium.’

For the uninitiated, kimchi premium refers to the price difference where BTC trades at a higher price on South Korean exchanges than on global markets. This premium is driven by local demand, regulatory factors, and capital controls in South Korea, leading to occasional price discrepancies.

Currently, the kimchi premium stands at -0.74%, leading to a lower market price for BTC on South Korean exchanges than the rest of the world. Notably, the kimchi premium has been negative since October 15.

A positive premium indicates strong demand for the underlying digital asset. In contrast, a negative premium might suggest that investors may be looking to trade on foreign exchanges due to South Korea’s stringent regulations surrounding digital assets.

A positive Kimchi Premium is common on South Korean exchanges, which often experience high trading volumes. When BTC briefly crossed $72,000 in March 2024, the kimchi premium surged as high as 10%.

The report suggests low domestic investor sentiment is a key factor behind the negative premium. While global crypto trading volumes have surged due to the upcoming US presidential elections and a Chinese stimulus package, sentiment in South Korea remains lukewarm. KP Jang, head of Xangle Research, commented:

Korea prohibits foreign and institutional investors from using domestic exchanges, which makes the decline in retail investor demand a more direct factor.

Further, the preference for typically riskier altcoins in hopes of extraordinary profits might influence the local South Korean crypto market, driving attention away from BTC and leading to lower trading volumes.

That said, analysts expect the negative kimchi premium to be a temporary phenomenon. Jang explained that, historically, such price discrepancies have only persisted for a short period.

Will A Regulatory Overhaul Help South Korea?

The crypto regulatory framework in the peninsular country is witnessing several changes to streamline digital asset trading and ensure sufficient customer protection mechanisms are in place.

In 2022, South Korea elected pro-crypto Yoon Suk-Yeol as president. As part of his election campaign, Yoon promised to reduce government interference in crypto markets, calling existing regulations “far from reality and absurd.”

In contrast, neighboring Japan has openly embraced digital assets amid evolving crypto regulations. For instance, earlier this year, Japan’s Government Investment Pension Fund (GIPF), with $1.5 trillion in assets, expressed a desire to gain exposure to BTC.

BTC trades at $67,559 at press time, down 0.4% in the past 24 hours. When writing, the leading cryptocurrency commands a total market cap of $1.33 trillion.

Featured image from Unsplash, Chart from Tradingview.com

Ash Tiwari

Ash is a dedicated crypto researcher and blockchain enthusiast with a passion for diving deep into the evolving world of decentralized technologies. With a background in writing and a natural curiosity for how digital assets are shaping the future, he has immersed himself in various sectors of the cryptocurrency space, including decentralized finance (DeFi), NFTs, and liquidity mining. His journey into crypto started with a desire to fully understand the technology behind it, leading him to explore and engage with these systems firsthand.

Ash’s approach to DeFi goes beyond surface-level research as he actively participates in decentralized protocols, testing their functionality to gain a deeper understanding of how they operate. From experimenting with staking mechanisms to exploring liquidity mining strategies, he is hands-on in his exploration, which allows him to provide practical, real-world insights that go far beyond theoretical knowledge. This immersive experience has helped him develop a comprehensive grasp of smart contracts, token governance, and the broader implications of decentralized platforms on the future of finance.

In the NFT space, Ash’s interest is driven by the technology’s potential to reshape ownership and creativity in the digital age. He has explored various NFT projects, gaining insights into how these digital assets function within different ecosystems. His focus is on understanding the evolving relationship between creators and communities, as well as the innovative uses of blockchain technology to establish authenticity and provenance in the digital world. Ash’s research in this area often touches on the intersection of culture, technology, and community-driven projects.

A key area of his expertise lies in liquidity mining, where he has engaged with various decentralized platforms to understand how liquidity provision contributes to the functionality and security of DeFi ecosystems. Ash’s hands-on involvement has allowed him to analyze the risks, rewards, and broader implications of liquidity pools, giving him a well-rounded perspective on this integral part of DeFi. His understanding of risk management and protocol design allows him to provide insights into how these systems can be navigated effectively, with an emphasis on both opportunity and caution.

When it comes to communicating these complex topics, Ash’s writing is grounded in clarity and depth. He excels at breaking down intricate blockchain concepts into easily digestible information for a wide audience. Whether explaining the workings of decentralized exchanges or outlining the future potential of blockchain technology, Ash ensures that his content is accessible to both those new to the space and experienced participants looking for deeper insights.

Beyond DeFi and NFTs, Ash explores a wide array of emerging blockchain applications. His research spans areas like cross-chain technologies, decentralized governance, and blockchain’s potential to integrate with traditional finance. He is continuously learning and adapting to the latest developments, ensuring that his insights are both timely and relevant. His interest extends to how these technologies are creating new possibilities for decentralization, transparency, and trust in a variety of industries.

Ash’s commitment to engaging with the crypto space firsthand gives him a unique perspective that goes beyond what can be learned from research alone. His practical involvement allows him to stay ahead of the curve, offering readers and enthusiasts a clear and comprehensive understanding of the rapidly evolving world of blockchain. Whether delving into the technical mechanics of DeFi or exploring the cultural impact of NFTs, Ash’s approach is always rooted in curiosity, research, and a desire to make this technology accessible to all.

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