By
Mayowa Adebajo
May 20th, 2024
This current drop in the Bitcoin Kimchi Premium comes as trading volumes on South Korea’s top five crypto exchanges plummet.
Within the last four weeks, the Bitcoin (BTC) price gap in South Korea, commonly known as the ‘Kimchi Premium’ has seen a steady decline. According to insights from CryptoQuant data, the Kimchi Premium shrunk by 1.54% in Asia on Friday. Noteworthy, the CryptoQuant metric draws a comparison between the price of Bitcoin in the United States market and in South Korea.
Bitcoin Kimchi Premium Helps in Exploring South Korean
Coinspeaker explained the Kimchi Premium as a distinctive phenomenon in the cryptocurrency market, exclusive to South Korea. This phenomenon offers alluring yet somewhat precarious opportunities for traders due to the country’s stringent regulations. It shows the difference between the trading prices of Bitcoin and other cryptocurrencies when traded on South Korean and foreign exchanges.
The Kimchi Premium was developed due to certain factors including favorable trade regulations in South Korea, people’s willingness to use Bitcoin, and the country’s strict financial controls. The introduction of cryptocurrency arbitrage trading has contributed reasonably to the growing popularity of the Kimchi Premium.
Traders are now taking advantage of the price difference by buying BTC on foreign exchanges and selling them on South Korean exchanges, bagging huge profits in the process. This is because the price difference in BTC trading between foreign and South Korean exchanges goes as high as 3% and 20%.
Ordinarily, the South Korea market is closed off to foreign investors. Similarly, local investors who use foreign exchanges to purchase large amounts of cryptocurrencies for arbitrage may be punished under the country’s Foreign Exchange Transactions Act. For a market that has such a short local supply of crypto, South Korea usually has huge unsettled demands.
March saw the Kimchi Premium surge by 11.44%, just around the time Bitcoin registered a new all-time-high (ATH) above $73,000.
BTC Market Outlook Impacted by Lack of Enthusiasm
This current drop in the Bitcoin Kimchi Premium comes as trading volumes on South Korea’s top five crypto exchanges plummet. The affected exchanges include Upbit, Bithumb, Coinone, Korbit and Gopax. These are notably the key players in the South Korean local crypto market. Cumulatively, these exchanges recorded trading volume of $2 billion in the past 24 hours.
Unfortunately, this is a far-cry from the $18 billion reported on March 6. This development suggests a plunge in enthusiasm in the local market, fueled by recent events in the region. The Middle East crisis that has impacted negatively on the operations of many businesses remain a bearish trigger. In addition, the United States spot Bitcoin ETFs have had a sunken outlook for the last few weeks.
On May 8, many spot Bitcoin ETFs including BlackRock’s IBIT and Fidelity’s FBTC, did not register any inflows or outflows. Only Bitwise’s Bitcoin ETF BITB recorded inflows of about $12 million.
Overall, there has been a drop in events that attenuates Bitcoin’s value in recent times. However, Bitcoin is currently trading at $63,015.97 with a 3.57% increase within the last 24 hours.