Bitcoin reaches $72K in South Korea with the resurgence of the ‘Kimchi premium’.

Bitcoin Hits Record High of $72,000 on Upbit in South Korea, as Kimchi Premium Spreads

## Bitcoin Price Reaches New High in South Korea, Kimchi Premium Returns!

Bitcoin (BTC) price briefly reached a new high of 96,734,000 South Korean Won or $72,504, on March 5, 3:00 pm (UTC), on Upbit, the largest cryptocurrency exchange in South Korea.

Bitcoin Price “Kimchi Premium” is Back

This price difference is known as the Kimchi Premium or the Korea Premium Index. It has been in an uptrend along with the BTC price since early February. The Korea Premium index rose from 5.19 on Feb. 28 to 6.84 on March 5, according to on-chain data resource CryptoQuant.

This coincided with Bitcoin price hitting a new all-time high above $69,200 on March 5, driven by continued inflows into United States’ Bitcoin ETFs.

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The Bitcoin price rally is mainly driven by institutional demand in the United States, according to Ho Chan Chung, an analyst at CryptoQuant. However, the situation in South Korea differs. Since the country has no spot Bitcoin ETFs, retail spot buying mainly drives the rising Bitcoin price.

The Kimchi premium was first observed in 2016 and spotlighted in a 2019 paper from the University of Calgary. According to the researchers, South Korean Bitcoin exchanges witnessed an average of 4.73% higher prices than exchanges in the United States between January 2016 and February 2018.

During Bitcoin’s bull run in December 2017, South Korean exchanges were trading Bitcoin nearly 50% higher than most exchanges worldwide, causing CoinMarketCap to remove some Korean exchanges due to “extreme divergence in prices from the rest of the world.”

During the 2021 bull run, the Kimchi premium peaked at 21.56% on May 19 when Bitcoin was trading above the $36,000 level before reaching its previous all-time high in November 2021.

Q&A: What Is the Kimchi Premium and Why Does It Happen?

Q: What is the Kimchi Premium? A: The Kimchi Premium is a price difference in Bitcoin trading where South Korean exchanges have higher prices compared to exchanges in other countries. It occurs due to market inefficiencies, especially during strong uptrends.

Q: Why does the Kimchi Premium happen? A: The Kimchi Premium is attributed to various factors, including limited access to global exchanges, higher retail demand in South Korea, and regulatory restrictions on spot Bitcoin ETFs in the country.

Q: Is it possible to profit from the Kimchi Premium? A: Traders have attempted to profit from the price differences between various exchanges, a strategy known as arbitrage. However, the premium has mainly remained due to market inefficiencies rather than being a consistent opportunity for arbitrage.

South Korea Considers Spot Bitcoin ETFs

Meanwhile, South Korea’s financial watchdog is reportedly considering allowing spot Bitcoin ETFs in the country, which could ultimately end this price difference if approved.

“Among authorities, I am one of those who are positive about virtual assets, while there are others who are wary, and we need to hear their opinions as well. We are internally discussing it,” said Lee Bok-hyun, governor of the Financial Supervisory Service, according to a March 5 Reuters report.

Back in January, South Korea’s financial authorities stated that they didn’t plan to regulate the sales of Bitcoin futures ETFs. However, they added that brokerage sales of spot Bitcoin ETFs could be in violation of the Capital Markets Act.

What Expectations Lie Ahead?

As Bitcoin continues to rally and reach new highs, it’s essential to consider the potential impact of spot Bitcoin ETFs in South Korea. If approved, the introduction of these ETFs could lead to a reduction in the Kimchi Premium, as it would provide a regulated and accessible way for South Korean retail investors to gain exposure to Bitcoin.

Furthermore, as the global interest in Bitcoin grows, it’s crucial to monitor any potential regulatory developments and the impact they may have on the market. Regulations can introduce stability and legitimacy to the cryptocurrency space, attracting more institutional investors and potentially driving further demand.

Given the continued institutional demand in the United States and the potential for regulatory changes in South Korea, it’s an exciting time for Bitcoin and its future growth.

📚 Reference list:

• “Strategic Exploit: Crypto Traders Harvested $3 Billion ‘Kimchi Premium’” – Blockchain News
• “Bitcoin Reaches New All-Time High” – Blocking.net
• “University of Calgary paper on Kimchi Premium” – University of Calgary
• “Bitcoin Market Cap Reaches A New High, Briefly Surpassing Silver” – Crypto News

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