Cryptocurrency Decline Causes Kimchi Premium to Plummet

Last Month's 25% to Single Digits
Impact of Bank Overseas Remittance Restrictions
Seems Like a Market Bubble Correction Process

[Asia Economy Reporter Gong Byung-sun] The Kimchi premium, which once exceeded 25%, has dropped to single digits. This has led to interpretations that the cryptocurrency market is moving away from the frenzy and the bubble is being resolved.

According to cryptocurrency data site Crypprice, as of 8:57 a.m. on the 11th, the Kimchi premium was 5.01%. On the 8th and 9th, it fell to the 3% range. The Kimchi premium refers to the price difference between domestic and overseas cryptocurrency exchanges; the greater the demand for cryptocurrencies in the domestic market, the higher the Kimchi premium.

Just a month ago, the Kimchi premium soared to unprecedented levels. On the 19th of last month, the Kimchi premium rose to 25.40%, marking the highest figure this year. At the beginning of this year, the Kimchi premium was negative as cryptocurrencies were sold at higher prices on overseas exchanges, but as the cryptocurrency frenzy reignited domestically, the Kimchi premium surged accordingly.

However, from the 20th of last month, the Kimchi premium began to decline. At that time, the Kimchi premium was 22.46%, but it plummeted nearly by half to 11.96% in just one day. Since the 30th of last month, it has consistently remained in the single digits.

The reason the Kimchi premium disappeared is due to the stagnation of the cryptocurrency market. Bitcoin, which surged to 81.99 million KRW in April, fell to the 40 million KRW range, reducing market trading volume. On this day, the 24-hour trading volume of the four major domestic cryptocurrency exchanges (Upbit, Bithumb, Korbit, Coinone) recorded $10.16121 billion (approximately 11.3399 trillion KRW), falling short of the KOSPI’s trading volume of about 19 trillion KRW as of the previous day. On the 7th of last month, the trading volume of the four major exchanges was 44.9716 trillion KRW, about three times that of the KOSPI.

Restrictions on overseas remittance limits by banks also contributed to lowering the Kimchi premium. As the Kimchi premium rose in April, the number of foreigners using it for illegal foreign exchange transactions increased significantly. From April 1 to 9, over 7 business days, the total remittance amount sent by Chinese residents in Korea to China through the five major banks (KB Kookmin, Shinhan, Hana, Woori, NH Nonghyup) was $72.7 million. This was eight times the total remittance amount in March. Consequently, banks set monthly limits on overseas remittances. KB Kookmin Bank restricted the monthly limit for non-face-to-face overseas remittances to $10,000 starting from the 21st of last month.

Experts interpret the reduction of the Kimchi premium as a sign that the bubble in the cryptocurrency market is being somewhat resolved. The Kimchi premium has traditionally indicated both a bubble in the cryptocurrency market and a precursor to a crash. Hwang Se-woon, a research fellow at the Korea Capital Market Institute, explained, "A correction period has come to the previously excited market," adding, "It should be recognized as a process of market normalization."

This content was produced with the assistance of AI translation services.