Bitcoin Chaos Arises Amid South Korea’s Financial Crisis

The “Kimchi Premium,” which reflects the price difference of Bitcoin on local exchanges compared to global prices, has seen a notable increase.

Amidst South Korea's deepening political crisis, a new twist has emerged in the country's Bitcoin market. As the crisis escalates, so does the "Kimchi Premium" - a term used to describe the price difference of BTC on local exchanges compared to global prices. This premium reflects the extra amount South Korean cryptocurrency investors pay to acquire Bitcoin compared to traders on other exchanges worldwide. As the crisis worsens, this premium is increasing.

Over the past month, the won has depreciated to its lowest level against the dollar since 2009. This devaluation is playing a key role in the rising Bitcoin Kimchi Premium. According to on-chain data from CryptoQuant, South Korean investors are now paying 3% more for Bitcoin compared to the global average.

This premium is significant considering the standard deviation of Bitcoin prices across exchanges, which usually stands at around 1%. However, this deviation has now reached 3% due to the political turmoil in South Korea. This situation has led to a surprising scene in the Bitcoin market.

While discussing the recent developments in South Korean politics, Jeff Park, Head of Bitwise's Alpha Strategies division, highlighted the underlying reasons for the political unrest. Park went on to explain how this relates to the increasing enthusiasm for Bitcoin among South Koreans.

According to Park, South Korea's legislative body moved to impeach Prime Minister and Acting President Han Duck-soo on Friday, following a motion by the ruling People Power Party to remove him from office. This decision comes just two weeks after President Yoon Suk-yeol was removed from his post by lawmakers.

During his time in office, Yoon attempted to implement military rule to protect against “anti-state” forces, which involved transferring civilian authority to the military and suspending civil liberties like freedom of speech and assembly.

This situation serves as a crucial warning for democratic regimes worldwide, Park said, adding:

“Using impeachment as a political tool underscores the fragility of democracy. This is a threat not only to Korea but to democracies globally.”

This news has sparked rumors that could potentially lead to the impeachment of Acting President Han, causing a sharp decline in the won's value. As a result, cryptocurrencies traded on South Korean exchanges surged in price compared to other exchanges worldwide.

This disparity is mainly due to South Korea's stringent capital control policies. Currently, the price of Bitcoin on South Korea's Upbit exchange is 144,450,000 won (approximately $98,000 USD), whereas the same amount of Bitcoin is priced at around $95,100 USD on Coinbase.

Past analyses have shown that increases in the Kimchi Premium often signal bullish trends. However, despite this growing price gap, investors are quickly flocking to dollar-based assets. South Korea's difficult economic conditions and the won's depreciation are driving investors toward digital assets, with Bitcoin being the preferred safe haven.