South Korea’s “Kimchi premium” has changed back to a discount, meaning cryptocurrencies like Bitcoin are now cheaper to buy on South Korean exchanges.
The phenomenon is named after the Korean dish kimchi. The Kimchi premium refers to when the price of Bitcoin (BTC) trades higher on South Korean exchanges than on other markets.
According to data from blockchain analytics provider CryptoQuant, the Korea Premium Index has been trading between the range of -0.24 and 0.01 between February 17 and 19.
At the time of writing, CoinMarketCap showed that BTC was trading at $24,464 on coin base and $24,487 in Binance.
By comparison, the Korean exchange bithumb had it listed at $24,386, while one of the largest exchanges in South Korea, upbitI was trading Bitcoin for $24,405.
It is the same situation for the second largest crypto by market cap, Ether (ETH).
At the time of writing, data from CoinMarketCap showed that ETH was trading at $1,687 on Coinbase and $1,691 on Binance, but ETH was changing hands at $1,682 on Bithumb and $1,683 on Upbit.
According to Doo Wan Nam, COO of node validator and venture capital fund Stablenode, the change in Kimchi’s premium to a discount marks a drop in interest from Korean retail investors.
“It usually means a drop in interest in cryptocurrency from Korean retail, which ironically is generally a better time to buy because you know you can always sell yours to Korean players for a 20% higher premium. late when they do FOMO,” he said.
Korean (Kimchi) Premium now becomes Korean Discount
It usually means waning interest in Korean retail cryptocurrencies, which ironically is often a better time to buy because you know you can always sell yours to Korean players for a 20% premium later when FOMO. pic.twitter.com/FFcvdi93PE
— doo | StableLab @Seoul (@DooWanNam) February 19, 2023
Some traders try to make a profit by trading price differences between various exchanges, a practice known as arbitrage.
Related: Korean regulators are investigating banks for more than $6.5 billion linked to Kimchi premium
In the past, the size of the Kimchi premium has been linked to the news, with notable drops recorded at times when bad news emerges about South Korean crypto exchanges.
The premium disappeared in early 2018 when the South Korean government announced that it planned to crack down on cryptocurrency trading.
A 2019 article from the University of Calgary found that Kimchi Premium first occurred in 2016.
According to the researchers, between January 2016 and February 2018, South Korean Bitcoin exchanges charged an average of 4.73% more than their US counterparts.
