Yes, you read that right. Bitcoin in South Korea is 15% costlier than usual. In the US, the price was around $57k when South Korea’s price was recorded to be $66k. This price increase is due to the high retail demand and the “Kimchi premium” charged over there. South Korean markets are disconnected from the global markets, which has led to this price gap.
The reason for this price gap
You must be wondering what the heck is “Kimchi premium.” This is the price gap between the price of the cryptocurrency in the South Korean exchanges and other local ones. In order words, this is the premium a South Korean needs to pay when purchasing Bitcoin or Etheremum in South Korea. But can’t they buy crypto from Coinbase? Well, no! This is because global exchanges don’t have support for South Korean currency.
#Bitcoin is trading at a 15% premium in South Korea, likely due to the incredible retail demand. The supply shock is real. pic.twitter.com/iD07ze42pO
— Documenting ₿itcoin ? (@DocumentingBTC) April 5, 2021
This price gap can be beneficial for traders that can make use of arbitrage. Arbitrage is the process of buying a cryptocurreny from one exchange at a lower price and selling it at a higher price somewhere else. This price difference between exchanges can be an easy way to make quick profits and risk-free trades. And this can also be used by traders to sell crypto in South Korea. But for this, the individual looking to make a purchase there needs to convert his/her curreny into dollars for the global purchase.
This could be essential for big investors in the future because the “Kimchi premium” is increasing considerably with time. It has averaged between 4-55% over the course of the years. Binance and other major exchanges were also closed down, to profit from this price gap by the local exchanges.
Can this price difference be eliminated?
Technically yes! But practically no! If South Korean investors buy from exchanges outside the country and sell in their local exchanges, this could bring down the price internally and increase it externally. This will, in turn, lead to a price balance. But the problem with that is the central laws and regulations. The government has made it extremely difficult to make such transactions possible. This is because such transactions and the flow of capital out of the country could lead to the economy’s downfall.
Even the strong laws that make crypto trading quite a difficult thing in the country could also be another reason for this. The threat of a ban has had a negative effect on the price of crypto in the past. And so, even such high premiums are being accepted by retail investors in the country.
What do you think about the “Kimchi premium” and the 15% higher price than Korean investors are paying for Bitcoin and other cryptocurrencies? And do you think that this should be changed? Let us know in the comments below. Also, if you found our content informative, do like it and share it with your friends.
Also Read: Sacramento Kings will give players the option to accept Bitcoin as salary.
