As a result of USD conversions and restricted arbitrage opportunities, the Bitcoin premium in South Korea expanded.
CryptoQuant data indicates that South Korea’s Bitcoin Kimchi Premium has reached a three-year peak of 12%, despite a sharp drop in the top BTC to $95,000.
This premium is indicative of the increasing price disparity between local and global markets, as South Korean merchants are paying a substantial premium for BTC in comparison to their international counterparts.
Despite its recurrence during periods of robust demand in South Korea’s crypto market, the Kimchi Premium frequently indicates more significant structural constraints.
The arbitrage opportunities are restricted by the strict capital controls of the Asian country, which prohibit the simple movement of funds across borders. The absence of a crypto futures market in South Korea is also a contributing factor, as global downturns are frequently accompanied by cascading liquidations, which do not occur in the country.
It is worth noting that retail investors are the primary drivers of the market, as opposed to institutions. Consequently, large-scale sell-offs are less frequent.
According to Ki Young Ju, the CEO of CryptoQuant, the Kimchi Premium’s recent increase is not the result of Korean merchants purchasing Bitcoin at reduced prices. On the other hand, the conversion of BTC into USD rather than the Korean won suggests that a reduced number of merchants are withdrawing funds in local fiat.
Capital outflows, rather than increased demand, may be the cause of the widening premium, as these trends indicate.
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