Bitcoin's price reached a remarkable high of $72,504 on March 5 at 3:00 pm (UTC) on Upbit, South Korea's largest cryptocurrency exchange, marking a resurgence of the "Kimchi premium."
BTC/KRW 1-Day chart. Source:Upbit
The Kimchi Premium, or Korea Premium Index, denotes the price disparity between Bitcoin's value in South Korea and its global average. This premium has been on the rise since early February, coinciding with Bitcoin's upward trajectory.
According to data from CryptoQuant, the Korea Premium index surged from 5.19 on Feb. 28 to 6.84 on March 5, aligning with Bitcoin's new all-time high above $69,200. Analysts attribute this rally to institutional demand in the United States, with retail spot buying primarily driving the surge in South Korea.
The Korea Premium, 1-month chart. Source:CryptoQuant
First observed in 2016 and highlighted in a 2019 paper from the University of Calgary, the Kimchi premium has historically seen South Korean exchanges trading Bitcoin at higher prices than global counterparts. During Bitcoin's bull run in December 2017, this premium peaked at nearly 50%.
While some traders engage in arbitrage to profit from these price differences, the premium largely persists due to market inefficiencies, particularly during strong uptrends. However, South Korea's financial watchdog is reportedly considering allowing spot Bitcoin ETFs, potentially alleviating this price disparity if approved.
Governor Lee Bok-hyun of the Financial Supervisory Service expressed openness towards virtual assets, but regulatory discussions are ongoing. Earlier statements indicated reluctance to regulate Bitcoin futures ETFs, but brokerage sales of spot Bitcoin ETFs could face regulatory scrutiny under the Capital Markets Act.
Despite regulatory considerations, the Korea Premium Index remains significant, with Bitcoin trading at around $70,000 on Upbit, while prices elsewhere hover around $67,000. The resurgence of the Kimchi premium underscores South Korea's continued prominence in the cryptocurrency market.
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