Reverse ‘Kimchi Premium’ Makes Bitcoin Cheaper In South Korea

Bitcoin (BTC) is trading slightly lower in South Korea compared to the global cryptocurrency markets due to a reverse ‘kimchi premium,’ not seen since October 2023.

South Korean cryptocurrency exchanges are offering Bitcoin (BTC) at a lower price than the rest of the world due to a reverse ‘kimchi premium,’ not seen since October 2023.

Bitcoin trades at a higher price on South Korean exchanges than on global markets, a phenomenon known as the ‘kimchi premium.’ This premium is driven by several factors, including strong local demand, regulatory restrictions on capital flows, and a limited supply of BTC on South Korean exchanges.

However, The Korea Times reported a price differential of more than $500 between BTC’s price in South Korea and global markets, with the local price being lower. This indicates a negative ‘kimchi premium.’

Analysts attribute this to a lack of domestic investor interest in cryptocurrency, leading to lower trading volumes on South Korean exchanges. In contrast, global crypto trading volumes have surged due to the upcoming US presidential elections and a Chinese stimulus package.

According to KP Jang, head of Xangle Research, foreign and institutional investors are barred from using domestic exchanges, making the decline in retail investor demand a more direct factor.

Moreover, the preference for typically riskier altcoins in hopes of extraordinary profits might influence the local South Korean crypto market, driving attention away from Bitcoin and leading to lower trading volumes.

Historically, such price discrepancies have only persisted for a short period, and analysts expect the negative kimchi premium to be a temporary phenomenon.

South Korea’s crypto regulatory framework is also undergoing several changes to streamline digital asset trading and ensure sufficient customer protection mechanisms.

In 2022, South Korea elected pro-crypto Yoon Suk-Yeol as president. As part of his election campaign, Yoon promised to reduce government interference in crypto markets, calling existing regulations “far from reality and absurd.”

In contrast, neighboring Japan has openly embraced digital assets amid evolving crypto regulations. For instance, earlier this year, Japan’s Government Investment Pension Fund (GIPF), with $1.5 trillion in assets, expressed a desire to gain exposure to BTC.

BTC trades at $67,559 at press time, down 0.4% in the past 24 hours. When writing, the leading cryptocurrency commands a total market cap of $1.33 trillion.