Original title: South Korean crisis flips ‘kimchi premium’ as Bitcoin and XRP fall sharply in Seoul
Original author: Pedro Solimano
Original source: https://www.dlnews.com/
Translation by: Daisy, Mars Finance
Following President Yoon Suk-yeol's declaration of martial law, the prices of Bitcoin and XRP fell sharply by double digits.
Typically, investors sell when cryptocurrency prices are higher in South Korea and buy at cheaper prices on other exchanges.
However, due to the political crisis, the market experienced extreme volatility, and arbitrage opportunities reversed.
Following the outbreak of the political crisis in South Korea, President Yoon Suk-yeol declared martial law, leading to a sharp drop in the value of most cryptocurrencies on South Korean exchanges on Tuesday.
Bitcoin on the South Korean Upbit exchange once fell by 33%, dropping to $61,200, while trading prices on Coinbase, Binance, and other exchanges were around $95,000.
Ethereum also saw double-digit declines, and during the spread of the political crisis, the discount relative to prices elsewhere in the world reached 7%. XRP, which had performed well recently, lost more than half of its value.
Abundant arbitrage opportunities
This development immediately created abundant arbitrage opportunities for traders.
Unlike previous years, savvy investors usually buy cheaper Bitcoin on exchanges in Hong Kong and the West and sell it in Korea at a 'kimchi premium', but today's situation is the opposite.
But this situation did not last long.
By late afternoon (UK time), the price of Bitcoin on South Korean exchanges rebounded, quickly closing this significant gap, now showing a 2.5% discount. The discount for Ethereum also dropped to 2.5%, while XRP traded at a 3% discount compared to the rest of the world.
It seems that Yoon Suk-yeol's martial law regime did not last long either.
According to the New York Times, later on Tuesday, South Korean National Assembly Speaker Woo Sang-ho stated that the martial law order had been declared 'invalid' after a resolution was passed.
Yoon Suk-yeol has accused the country's opposition party of sympathizing with North Korea and paralyzing the government through 'anti-national' actions.
On Tuesday, the Korean won fell 1% against the dollar, marking the lowest point in two years.
"Kimchi premium"
The unique dynamics of the South Korean cryptocurrency market have long driven the formation of the kimchi premium.
South Korea has strict capital controls, strong local cryptocurrency demand, and a relatively closed financial system.
In recent years, this premium has often turned negative, leading investors to adopt a pessimistic view of the country's cryptocurrency market.
Analysts attribute this sentiment to the 'weak' local market sentiment, optimistic expectations following Trump's election victory, which they believe will shift more trading to non-Korean platforms, and a weak altcoin market, as reported by the Korea Times.
South Korea's major political parties reached an agreement over the weekend to postpone the implementation of a new tax regime.
The two-year delay means that the 20% capital gains tax on cryptocurrency trading will not take effect until 2027.
