On March 5, 2024, the Bitcoin price rose to $72,000 on South Korean stock exchanges, creating excitement in the cryptocurrency market. The reason behind this sudden rise is a phenomenon known as the “kimchi premium.” So, what is this kimchi premium and how did it affect the Bitcoin price? In this article, we will examine what the kimchi premium is, how it occurs, and what it means for the cryptocurrency market.
Bitcoin price broke a record on Upbit
The price of Bitcoin (BTC) rose to $ 72,000 on South Korean exchanges, once again showing the effect of the phenomenon known as the “kimchi premium”. Upbit, South Korea’s largest exchange, pushed BTC/KRW to 96,530,000 won ($72,000) on March 5. This price is 6% higher than the Bitcoin price on global exchanges such as Binance and Coinbase. At the same time, a similar situation occurred for Ethereum (ETH), with ETH/KRW reaching 5.28 million Korean won ($3,956) with a 7% premium.
Wu Blockchain also shared a post on Twitter regarding the issue, stating that there is a “kimchi premium” for BTC and ETH trading pairs on Upbit, which currently corresponds to $72,000 with a 6% premium. cryptokoin.com As we reported, the Kimchi premium represents the spread between the Bitcoin price on South Korean exchanges and the Bitcoin price on global exchanges. This phenomenon was first observed in early 2016 and has since become a feature of the South Korean cryptocurrency market.
Why does kimchi premium occur?
Several factors play a role in creating the kimchi premium:
- Legal regulations: South Korea is one of the countries that strictly regulates the cryptocurrency market. Foreign exchanges that are not licensed by the regulator cannot support the KRW parity. This causes the South Korean market to be isolated from the global market and price differences to occur.
- Investor interest: South Korean investors show great interest in cryptocurrencies. This high demand causes prices to rise relative to global markets.
- Arbitrage opportunities: Price differences create opportunities for arbitrageurs. Arbitrageurs make profits by buying Bitcoin on low-priced exchanges and selling it on high-priced exchanges.
How long does kimchi premium last?
It is unclear how long the kimchi premium will continue. In the past, increases in kimchi premium have not always resulted in decreases. While some experts attribute this increase in kimchi premium to the increasing purchasing demand of South Korean investors, others argue that this situation is not sustainable. The kimchi premium is an interesting feature of the South Korean cryptocurrency market. Time will tell how long this premium will continue and what consequences it will have for investors.
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