What is kimchi premium and how does it affect the cryptocurrency market?

The kimchi premium is the difference between the price of bitcoin on the South Korean crypto exchanges and on the world ones. In December 2020, it went into the negative zone (the price of BTC on the South Korean exchanges was lower than on the world platforms), and has been growing steadily since then. 

The kimchi premium is the difference between the BTC price on global and South Korean crypto exchanges. Now it is around 15%. At the peak of the previous bullish cycle, the premium was 54%.

The fact is that South Korea’s monetary system is rather closed. Because of this, market makers do not have the ability to arbitrate and level the price. As a result, we see an increase in quotations on the South Korean stock exchanges due to increased demand. So, at the beginning of 2018, this figure reached 54%, after which the cryptocurrency market began to collapse.

At the moment, bitcoin on the South Korean exchanges is traded at $ 67,400. Thus, the kimchi premium is now around 15%.

Price chart of BTC in relation to South Korean won

“It worries me, but bitcoin fundamentals look strong ,” said Ki Yong Joo, CEO of analytics platform CryptoQuant.

Many market participants perceive the rise in the kimchi premium as a sign of FOMO (loss of profits syndrome). As a rule, FOMO occurs at the very peak of the market, because retail investors, seeing a huge rise in prices, begin to massively buy up an asset for fear of not making money.

As mentioned at the beginning of the article, at the end of the previous bullish cycle on the crypto market, the kimchi premium reached 54%. That is, now it is not yet at the maximum level. In addition, South Korea now accounts for 1.7% of the total trading volume, so it is unlikely to have a significant impact on the global situation in the crypto market.

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