Despite Bitcoin Reignition... Tepid 'Kimchi Premium'

Despite Bitcoin's 40% Surge in a Month, Domestic Investors Reluctant to Participate
KRW Share in Global Bitcoin Trading Volume Halves in 3 Months... Falls to 2nd Place Behind Japan

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Gong Byung-sun] The representative cryptocurrency Bitcoin is on the rise, but the Kimchi premium is disappearing. This is interpreted as domestic cryptocurrency investors losing confidence as the Specific Financial Information Act (Special Act on Reporting and Using Specified Financial Transaction Information, or Special Act) is set to be enforced in September and alternative investment targets such as the metaverse emerge.

According to cryptocurrency data site Crypprice, as of 8:55 a.m. on the 18th, the Kimchi premium recorded -0.14%. It has been declining continuously since rising to 2.62% on the 4th. The previous day, it even dropped to -1.71%, marking the lowest level this month.

The Kimchi premium refers to the price difference between domestic and overseas cryptocurrency exchanges. The lower the demand for cryptocurrencies in the domestic market, the lower the Kimchi premium. Despite Bitcoin rising about 40% in the past month, domestic investors appear reluctant to participate in the cryptocurrency market.

In fact, the influence of domestic investors in the global cryptocurrency market is decreasing. According to cryptocurrency data site Coinhills on the same day, the proportion of Korean won in total Bitcoin trading volume was only 4.24%. This is nearly half of the 8.44% recorded on May 8 and has caused South Korea to lose its long-held position as the second-largest country by Bitcoin trading volume to Japan.

Experts analyze that domestic investors’ sentiment has cooled ahead of the enforcement of the Special Act. Cryptocurrency exchanges must meet requirements such as manpower and systems to prevent money laundering to operate until September 24. However, on the 16th, the Financial Services Commission announced that all 25 exchanges consulted were inadequately prepared to comply with the Special Act. Concerns among domestic investors are growing as there are voices suggesting that even the four major exchanges with real-name accounts (Upbit, Bithumb, Coinone, and Korbit) may fail to complete registration by the deadline.

Another factor is the emergence of alternative investment targets to cryptocurrencies. Recently, new investment targets such as the metaverse and eco-friendly startups have gained popularity among domestic investors. Maxst, which was listed on KOSDAQ on the 29th of last month, stood out as a metaverse-themed stock and recorded the upper price limit for three consecutive trading days after listing. Professor Hong Ki-hoon of Hongik University’s Department of Economics explained, "Cryptocurrencies also attracted attention under the name of blockchain and future currency," adding, "Because it has been mentioned for a long time, the public may feel boredom rather than innovation when encountering cryptocurrencies."

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