Kimchi Premium Continues Even During Cryptocurrency Slump

Investor Participation Remains High
Lower Mining Volume Compared to Abroad
Supply Shortage Also a Contributing Factor

[Image source=Reuters Yonhap News]

[Asia Economy Reporter Lee Jung-yoon] Although the cryptocurrency market is experiencing a downturn, with Bitcoin prices falling from the $23,000 range earlier this month to the $21,000 range, the Kimchi Premium continues to be maintained.

According to cryptocurrency data firm CryptoQuant on the 24th, the Kimchi Premium index for Bitcoin was recorded at 1.24 as of the previous day. This index represents the percentage difference in cryptocurrency market prices between domestic exchanges and overseas exchanges, indicating that domestic prices are approximately 1.24 percentage points higher. The Kimchi Premium refers to the price gap between domestic and overseas cryptocurrency exchanges, and the higher the demand for cryptocurrencies in the domestic market, the higher the Kimchi Premium tends to be.

The Kimchi Premium for Bitcoin turned positive after recording -0.63 on the 19th of last month and 0.58 the following day, and has been on an upward trend since. On the 18th of this month, it even rose to 4.02, the highest level since May 12. The Kimchi Premium for Ethereum, the leading altcoin, was 1.12 as of the previous day and has also remained positive since the 20th of last month.

The influence of domestic investors in the overall cryptocurrency market remains high. Due to strong interest from domestic investors in coins, Bitcoin prices traded on domestic exchanges are relatively more expensive than overseas prices. According to Coinhills, a cryptocurrency disclosure platform, the Korean won accounted for 2.63% of the total Bitcoin trading volume on that day, ranking third after the US dollar (86.52%) and the Japanese yen (6.12%). It also recorded a higher level than the euro (2.50%) and the pound sterling (0.90%).

Additionally, restrictions on transfers between exchanges to prevent money laundering and issues such as costs have resulted in less active cryptocurrency mining domestically compared to abroad, causing a shortage in cryptocurrency supply, which is also cited as a factor contributing to the Kimchi Premium.

As the Kimchi Premium continues to be maintained, suspicions of arbitrage trading exploiting this have been raised. In a case where a total of 8.5 trillion won was transferred overseas through domestic banks, it was revealed that funds transferred from domestic exchanges were gathered into trade corporation accounts before being sent abroad, raising suspicions of arbitrage trading. Previously, abnormal foreign exchange transactions amounting to around 300 billion won through Hana Bank were identified, which were investigated to be arbitrage trades targeting the Kimchi Premium.

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