Bitcoin's price in South Korea has surged to a new two-year high, creating a significant premium over its value on global exchanges.
Bitcoin's price in South Korea has surged to a new two-year high, creating a significant premium over its value on global exchanges. This phenomenon, known as the "Kimchi Premium," has been driven by a combination of factors, mainly from retail spot buying in South Korea.
On March 5, Bitcoin's price briefly reached 96.9 million South Korean Won, or $72,820, on Upbit, the largest cryptocurrency exchange in the country. This represented a premium of over 6.8% compared to the global average price. Upbit’s BTC/KRW pair recorded over $566 million in trading volume over the past 24 hours.
The Kimchi Premium has been on an uptrend since early February, coinciding with Bitcoin's rally to briefly touching its all-time high of $69,000. Analysts attribute this premium primarily to the lack of spot Bitcoin exchange-traded funds (ETFs) in South Korea, which limits institutional investment and drives up retail demand.
The Kimchi Premium was first observed in 2016 and has persisted during periods of strong Bitcoin price appreciation. In December 2017, South Korean exchanges were trading Bitcoin nearly 50% higher than global exchanges.
Some traders attempt to profit from the price differences between exchanges through arbitrage, but the premium has largely remained due to market inefficiencies. Furthermore, the country’s Foreign Exchange Transactions Act prohibits Korean traders from buying crypto from overseas exchanges to profit from arbitrage.
At the time of writing, the Korea Premium Index remains intact, with Bitcoin trading at around 93,650,000 KRW ($70,365) on Upbit, while BTC is trading at $66,320 globally.
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