South Korea’s bitcoin kimchi premium surged to a three year high as BTC prices on local exchanges remained relatively stable despite a broader crypto market downturn.

The term "Kimchi Premium" comes from the popular Korean dish Kimchi, which is basically a fermented cabbage dish. Premium refers to a situation where a digital currency is priced higher on one exchange compared on others, which is a common occurrence on the South Korean exchanges, which gives birth to the term Kimchi premium.

#Bitcoin Kimchi Premium is 12% right now—a three-year high. The main reason for BTC drop seems to be the strong DXY. pic.twitter.com/fjFOyUH5Pr
— Ki Young Ju (@ki_young_ju) February 3, 2025
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According to data from CryptoQuant, the kimchi premium reached 9.7% for bitcoin at around 2 a.m. on Monday in South Korea. This marks the highest premium since April 14, 2024, when it exceeded 13%. At the time of writing, it has slightly declined to 8.24%.

The Kimchi Premium phenomenon that only happens in Korea?

The kimchi premium, the term referring to the phenomenon where Bitcoin trades at a higher rate on South Korean exchanges compared to the global markets.

You might think that investors could benefit from the arbitrage, but it is harder than you think because of South Korea's capital controls, which prevent foreign investors from directly accessing local exchanges. Additionally, South Korean investors who are caught trying to profit from the difference prices from the different exchanges could also face potential regulatory penalties.

“The Kimchi Premium typically rises during bull markets when Korean investors bid higher, but it can also spike during periods of panic selling,” said Presto Research Analyst Min Jung. “This happens when selling pressure on Korean exchanges is lower than in global markets.”

The rise in bitcoin prices in Korea also currently facing is also partially a result of the tariffs that President Trump is imposing on Canada, Mexico and China, which is making investors to flock to bitcoin during this time of economic instability.

Where is bitcoin heading to next?

Blockchain researchers have also noted that the premium went up not because Korean traders were buying the dip, but because the cryptocurrency was being converted into U.S dollars. This suggests that investors were offloading their holdings in response to broader market pressures rather than accumulating bitcoin.

The U.S dollar has strengthened significantly in recent times, adding downward pressure on the price of BTC. As a result, many traders in South Korea have responded by shifting their coins into USD instead of the Korean Won, inadvertently contributing to the growing gap in bitcoin's prices between Korean and international exchanges.

According to Coinglass data, the crypto market has witnessed over $2.1 billion in liquidations in the past 24 hours. Experts believe that if the selling pressures of U.S investors continue to pile up, the premium phenomenon would continue to balloon.

Despite strict regulatory oversight, South Korea remains one of the most active crypto markets globally, with a strong emphasis on altcoin trading. According to The Block’s data dashboard, Upbit, South Korea’s largest exchange, ranked as the fourth-largest centralized exchange by monthly trading volume, processing over $187 billion in transactions in January.