Bitcoin (BTC) is experiencing a price dip in South Korea, trading slightly lower compared to the global cryptocurrency markets due to a reverse ‘kimchi premium,’ a phenomenon not observed since October 2023.
According to The Korea Times, there’s currently a more than $500 gap between Bitcoin’s price in South Korea and the global markets, attributed to a negative ‘kimchi premium.’ Typically, the kimchi premium refers to the price difference where Bitcoin trades at a higher price on South Korean exchanges than on global platforms. This disparity is often driven by local demand, regulatory conditions, and capital controls in South Korea.
As it stands, the kimchi premium is at -0.74%, resulting in a lower Bitcoin price on South Korean exchanges compared to the rest of the world. The premium has been negative since October 15. A positive premium generally indicates strong demand for Bitcoin, whereas a negative premium may suggest that South Korean investors are opting to trade on foreign exchanges due to stringent local regulations on digital assets.
South Korean exchanges usually see high trading volumes and a positive kimchi premium. For instance, when Bitcoin briefly touched $72,000 in March 2024, the kimchi premium surged to as high as 10%. However, the current low domestic investor sentiment is also contributing to the negative premium. While global crypto trading volumes have soared, spurred by the upcoming US presidential elections and a Chinese stimulus package, South Korea’s sentiment remains tepid.
KP Jang, head of Xangle Research, commented that Korea’s prohibition on foreign and institutional investors using domestic exchanges makes the decline in retail investor demand more impactful. Additionally, the pursuit of riskier altcoins for potential extraordinary profits could be diverting attention from Bitcoin, leading to lower trading volumes on South Korean markets.
Analysts expect this negative kimchi premium to be temporary. Historically, such price discrepancies have only lasted for short periods. The crypto regulatory framework in South Korea is undergoing changes aimed at streamlining digital asset trading and enhancing customer protection mechanisms. In 2022, South Korea elected pro-crypto Yoon Suk-Yeol as president, who, during his campaign, promised to reduce government interference in crypto markets, criticizing existing regulations as “far from reality and absurd.”
Meanwhile, neighboring Japan has embraced digital assets amidst evolving crypto regulations. For instance, Japan’s Government Investment Pension Fund (GIPF), with $1.5 trillion in assets, has expressed interest in gaining exposure to Bitcoin earlier this year.
Bitcoin is currently trading at $67,559, down 0.4% in the past 24 hours, and holds a total market cap of $1.33 trillion.