‘Kimchi Premium’ for Crypto Returns as South Korean Market Heats Up
The Kimchi Premium, a well-known dynamic of the crypto market in South Korea, has returned after several months, reflecting increased local demand and institutional trading driving the price of cryptocurrencies on South Korean exchanges above global averages.
According to blockchain analytics firm Chainalysis, the price difference for cryptocurrencies between South Korean and global exchanges has seen a surge in recent months, measured by the Korea Premium Index. The premium seems to occur most with leading cryptos such as Bitcoin and Ethereum but also with many altcoins.
According to Chainalysis, the premium usually peaks when turmoil in the markets is at its maximum and both retail and institutional investors are trying to catch all their gains. The same report points out that a very strong correlation exists between the volume of money transferred from local exchanges to global exchanges and the premium amount.
South Korean traders typically want to manage their funds on local exchanges. Such local demand combined with specific market conditions in the country has brought about a gap between domestic and international platform prices.
This fundamentally feeds the fire of Institutional investors as they get much more involved in driving the index forward. Large-scale investors are thus massively involved in acts of arbitrage-buying at cheaper prices from global exchanges and selling on South Korean platforms at a premium.
