Kimchi Premium Crashing After Bitcoin Trading Over $ 70,000 In South Korea

Bitcoin’s price skyrocketed to over USD 70,000, but only in South Korea when the so-called “kimchi premium” hit an annual high of over 20%. However, it has dropped significantly in the past few hours, which, according to historical data, could result in a retracement for BTC.

Kimchi Premium Yearly High

Named after a traditional South Korean side dish, “Kimchi Premium” represents the difference in price of BTC on local exchanges and around the world. While it might sound logical that Bitcoin should trade at the same or a similar price in every country since it is a global asset, it is rarely the case in South Korea.

CryptoQuant data shows a gap between trading venues in the East Asian country and other exchanges. As the following graphic shows, the prices vary regularly.

Bitcoin Korea Premium Index. Source: CryptoQuant

The premium has escalated further in the last few days and reached an annual high of over 20% yesterday. The reasons for this discrepancy are complex. Lex Moskovski, CEO of Moskovski Capital, noted that local regulations allow users to only sell BTC for the Korean won but not withdraw it in USD. This “does not provide any arbitrage to bring the price down”.

Bitcoin Kimchi Premium annual high.  Source: CryptoQuantBitcoin Kimchi Premium annual high. Source: CryptoQuant

There could be more to the story, however. The price of BTC soared to over $ 70,000 on the South Korean exchange, Upbit, owned and operated by Dunamu. The latter is to go public on the New York Stock Exchange (NYSE).

This speculation has increased demand for the company and all other related projects. Aside from Upbit’s growing popularity in South Korea, companies owning Dunamu stocks like Kakao, Woori Capital and Hanhwa Investments have seen their respective stocks jump up to 8% in a matter of days.

Premium refuses; History points to a drop in prices

A recent chart from CryptoQuant highlighted the “significant” drop in kimchi premium. The price of Bitcoin on South Korean exchanges and other trading venues has closed the massive gap and is around USD 58,000 everywhere.

BTC Korea Premium Index in decline.  Source: CryptoQuantBTC Korea Premium Index in decline. Source: CryptoQuant

However, history shows a possible decline in the price of the primary cryptocurrency. Vetle Lunde, an analyst at Arcane Research, posted an infographic showing that after the kimchi premium peaked, the price of BTC has, in most cases, plunged south.

For example, market corrections have been made after two of the highest peaks – 63% in May 2017 and 47% in January 2018.

Given that the premium has dropped significantly in the past few hours, it can be assumed that it has already peaked. Even so, the South Korean market is no longer as big as it was in 2017/2018, and the impact on prices could be significantly less.

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