According to CryptoQuant.com, the Korea Premium Index for Bitcoin, also known as the “Kimchi Premium,” reached 7% Nov. 28, which is the highest since May.
- Kimchi Premium is a term used by cryptocurrency investors in South Korea to describe the price gap between tokens on South Korean exchanges and those outside of Korea. CryptoQuant’s Korea Premium Index now points to around 4%, and it tweeted that the Kimchi Premium surge “may indicate that retail investors are joining crypto.”
- The crypto prices in South Korea differ from prices outside of the country because foreign investors are blocked from trading in its virtual asset market, and it is illegal for domestic exchanges to supply liquidity. In a free market, the price gap would be filled in as investors outside Korea would jump at the cheaper price.
- Investors who purchase crypto from foreign exchanges with foreign currencies may be punished for illegal arbitrage, or “hwanchigi,” according to Korea’s Foreign Exchange Transactions Act. Korea requires any foreign transactions over US$5,000 to be examined and approved by respective banks to prevent excessive outflow of funds overseas.
- With limited supply of cryptocurrencies in the country, the rise of the Kimchi Premium could imply that Korean investors are buying more crypto. However, the rate is still low compared to the price difference at the height of South Korea’s crypto investment fever in April and May, when it reached over 20%.