What is the Kimchi Premium?
The Kimchi Premium is essentially the difference in cryptocurrency prices between South Korean exchanges and global markets. Coined with affection (and a sprinkle of irony) after South Korea’s beloved fermented cabbage dish, this phenomenon once saw Bitcoin prices soar in Korea compared to other countries.
The Recent Shift: Discounted Cryptos
Recently, the tide has turned, and the Kimchi Premium has transformed into a discount. Current trading scenarios show Bitcoin cheaper on South Korean platforms like Upbit and Bithumb compared to Western exchanges like Coinbase and Binance. It’s akin to seeing last season’s trendy sweater at a clearance sale! According to CryptoQuant data, fluctuations from February 17 to 19 ranged from -0.24 to 0.01, indicating a notable decline in this premium.
Bitcoin: A Comparative Pricing Analysis
As of late February, Bitcoin was trading at approximately:
- Coinbase: $24,464
- Binance: $24,487
- Bithumb: $24,386
- Upbit: $24,405
Interestingly, this price disparity isn’t limited to Bitcoin. For Ether, traders found that:
- Coinbase: $1,687
- Binance: $1,691
- Bithumb: $1,682
- Upbit: $1,683
Impact on Korean Retail Investors
Doo Wan Nam, a prominent figure in the crypto community, points out that this discount reflects waning interest among Korean retail investors. The silver lining? For savvy traders, it may be the perfect time for acquisition, as the market will likely shift back to a premium with the next surge of FOMO — the Fear Of Missing Out!
Arbitrage: The Trader’s Playground
In the face of the Kimchi Discount, some traders engage in arbitrage, capitalizing on the price differences between exchanges. It’s like a game of musical chairs, with profit awaiting the nimble mover. Furthermore, historical patterns note that external news can significantly influence the premium, tightening or relaxing in sync with local regulations and market sentiment.
A Brief Look Back at History
The Kimchi Premium has been around since 2016, initially gaining traction especially during periods of high trading activity. A notable research paper from the University of Calgary highlighted that South Korean Bitcoin exchanges priced their assets 4.73% higher than U.S. exchanges from 2016 until early 2018, where the government announced stricter regulations. Quite the rollercoaster ride!
