South Korea’s “Kimchi premium” has reverted to a discount, making cryptocurrencies like Bitcoin more affordable to purchase on South Korean exchanges.
Kimchi, a Korean dish, inspired the phenomenon’s name. The “Kimchi premium” occurs when the price of Bitcoin BTC falls below $24,494.
trades at a higher price on South Korean exchanges than in other markets.
According to data from blockchain analytics provider CryptoQuant, the Korea Premium index fluctuated between -0.24 and 0.01 between February 17 and February 19.
BTC was trading at $24,464 on Coinbase and $24,487 on Binance at the time of writing, according to CoinMarketCap.
In comparison, it was listed at $24,386 on the Korean exchange Bithumb, and $24,405 on Upbit, one of South Korea’s largest exchanges.
The situation is similar for Ether, the second-largest cryptocurrency by market cap.
ETH was trading for $1,687 on Coinbase and $1,691 on Binance at the time of writing, but it was changing hands for $1,682 on Bithumb and $1,683 on Upbit, according to CoinMarketCap data.
Korean (Kimchi) Premium is now turned into Korean Discount 🤔
Generally it means fall in interest in crypto from Korean retail, which ironically is generally a better time to buy cause you know you can always sell yours to Korean gamblers for 20% premium later when they FOMO pic.twitter.com/FFcvdi93PE
— Doo | StableLab @Seoul (@DooWanNam) February 19, 2023
According to Doo Wan Nam, chief operating officer of node validator and venture capital fund Stablenode, the drop in interest from Korean retail investors is due to the Kimchi premium becoming a discount.
Arbitrage is a strategy used by some traders to profit from price differences between exchanges.
In the past, the size of the Kimchi premium has been linked to news, with significant drops recorded when bad news about South Korean crypto exchanges broke.
When the South Korean government announced plans to crack down on cryptocurrency trading in early 2018, the premium vanished.
According to a 2019 paper from the University of Calgary, the Kimchi Premium first appeared in 2016.
South Korean Bitcoin exchanges charged an average of 4.73% more than their US counterparts between January 2016 and February 2018, according to the researchers.
