The “kimchi premium” has shifted to discount again, which may explain the sentiment in the cryptocurrency market, at least in South Korea. South Korea's "kimchi premium" is discounted again, meaning it's now cheaper to buy cryptocurrencies like bitcoin on South Korean exchanges.
The phenomenon is named after the Korean dish kimchi. The kimchi premium is when the price of Bitcoin (BTC) trades higher on South Korean exchanges than in other markets.
According to data from blockchain analytics provider CryptoQuant, the Korean premium index has been fluctuating between -0.24 and 0.01 between Feb. 17 and 19. At the time of writing, CoinMarketCap shows BTC trading at $24,464 on Coinbase and $24,487 on Binance.
In comparison, bitcoin on South Korean exchange Bithumb is trading at $24,386, while Upbit, one of South Korea’s largest exchanges, is trading at $24,405.
The same goes for Ether (ETH), the second-largest cryptocurrency by market capitalization. At the time of writing, data on CoinMarketCap shows ETH trading at $1,687 on Coinbase and $1,691 on Binance — but ETH is trading at $1,682 on Bithumb and $1,683 on Upbit.
Doo Wan Nam, chief operating officer of node validator and venture capital fund Stablenode, said the switch from a kimchi premium to a discount marks a drop in interest from retail investors in South Korea.
Generally this means that Korean retail interest in cryptocurrencies is down, which is ironically usually a better time to buy because you know you can always get 20% after the Korean gamblers FOMO Sell your cryptocurrency to them at a premium, he said. Some traders try to profit by trading the difference in prices between different exchanges, a practice known as arbitrage.
In the past, the size of the kimchi premium has been linked to news, with significant dips in the kimchi premium when bad news broke about South Korean cryptocurrency exchanges.
The premium evaporated in early 2018 when the South Korean government announced plans to crack down on cryptocurrency trading. A 2019 paper from the University of Calgary found that the pickle premium first emerged in 2016.
According to the researchers, between January 2016 and February 2018, South Korean bitcoin exchanges charged an average of 4.73 percent more than their U.S. counterparts.
