Bitcoin Kimchi Premium Returns to South Korea's Cryptocurrency Market as the Country Grapples with Political Instability

This has led to a weakened Korean won (KRW) and a higher price for the leading cryptocurrency.

South Korea is once again experiencing the ‘kimchi premium,’ where the price of Bitcoin (BTC) is trading at a higher premium on South Korean cryptocurrency exchanges compared to global platforms. This premium has resurfaced due to political instability in the country, which has resulted in a weakening Korean won (KRW) and increased demand for cryptocurrencies among South Koreans.

According to Ki Young Ju, the CEO of CryptoQuant, the KRW-USD trading pair has reached a 15-year low. This reflects diminishing confidence among South Koreans in their fiat currency due to the country’s economic troubles. The depreciating won has prompted South Koreans to invest in emerging assets like Bitcoin to preserve the purchasing power of their KRW during these times.

Ju explained in a post on Medium that South Korean crypto traders are大量 converting KRW into cryptocurrencies like Bitcoin and the USD-pegged stablecoin USDT on the Upbit exchange, where BTC trades at a premium of 3-5%. This price difference is what is commonly referred to as the Bitcoin ‘kimchi premium.’

Usually, the kimchi premium arises due to high local demand, increasing regulatory barriers, and limited arbitrage opportunities in South Korea’s cryptocurrency market. However, in this instance, the premium is primarily driven by the weakening KRW due to rising political turmoil in the country.

At the time of writing, Bitcoin is trading in South Korea for 145,000,000 KRW or approximately $98,600, while on a global exchange like Binance, BTC is trading at $95,315. The difference between these platforms highlights the impact of the kimchi premium.

Rising Political Turmoil Weakens KRW

The South Korean won’s decline can be attributed to the ongoing political unrest, which has escalated since December 3. On this date, former president Yoon Suk Yeol, who was later impeached, declared martial law for six hours before reversing the decision. Afterwards, South Korea’s parliament impeached Han Duck-soo, the country’s prime minister and acting president.

These dramatic developments have sent shockwaves through global markets, undermining confidence in South Korea’s democratic institutions and raising fears of the country facing its worst political crisis in decades. The monthly chart below illustrates how the KRW has plunged to its lowest value against the USD since March 2009.

In a separate post on Medium, Jeff Park, head of alpha strategies at investment manager Bitwise, highlighted that South Korea’s political turmoil centers on allegations of election fraud and a loss of trust in the country’s National Election Commission (NEC).

“The use of impeachment as a political tool, combined with allegations of foreign election interference, underscores the fragility of democracy in the face of disinformation,” Park commented. “This is not just a Korean story; it’s a warning for democracies worldwide.”

The political unrest in South Korea has sent its cryptocurrency market into a frenzy, leading to record-breaking trading volumes. At press time, BTC trades at $95,315, down 0.2% in the past 24 hours.