[Bitcoin Now] The Kimchi Premium Returns... Bitcoin Trades Higher in Korea

Kimchi Premium Index Turns Positive

Bitcoin Breaks Out of the Range, Settles Above $77,000

Despite the Premium, Opinions Are Split on Recovery of Investor Sentiment

The phenomenon known as the "Kimchi Premium," where Bitcoin trades at a higher price domestically than abroad, has resurfaced. Opinions are divided, with some interpreting this as a sign of recovering investor sentiment, while others see it as an optical illusion triggered by the slight correction following Bitcoin’s steep price increase.

Yonhap News Agency

Bitcoin Trading at a Higher Price in Korea Compared to Overseas... Premium Re-emerges

According to the on-chain data platform CryptoQuant on September 4, the Bitcoin Kimchi Premium index reached 0.10 on September 2. This index represents the percentage difference between the price of Bitcoin on five major Korean won-based crypto exchanges, such as Upbit and Bithumb, compared to overseas exchanges. An index value of 0.10 means that the price of Bitcoin on domestic exchanges is 0.1% higher than on overseas exchanges.

Up until recently, the Kimchi Premium index has been in negative territory. Since the beginning of this year, out of 244 days up to September 1, the index was negative for 137 days, which is more than a month longer than the days it was positive. This negative Kimchi Premium persisted for 35 consecutive days from June 20 through July 24. This streak was even longer than the previous 30-day spell from May 20 to June 18 of this year. The previous longest period was 23 days, which occurred from July 8 to July 30 last year.

The trend reversal began on August 25. After remaining negative for 8 consecutive days until August 24, the Kimchi Premium index shifted into positive territory, hitting 0.59 on August 25. Except for turning negative on August 27 (-0.16), it continued in positive territory afterward, climbing as high as 1.10 on September 1. The index averaged 0.49 between August 25 and September 2.

The Kimchi Premium index tends to rise when the price of Bitcoin goes up. In May, the index remained mostly positive except for May 6 (-0.56), but it reverted to negative territory from May 13 (-0.38) onward. Bitcoin’s price soared to $82,018.37 on May 11, but quickly dropped, slipping down to the $60,000 level by June.

This time as well, a rise in Bitcoin’s price led to the formation of the Kimchi Premium. After hovering around the $60,000 mark, Bitcoin surged to $80,638.20 during trading on August 25, breaking through the $80,000 level. It has since settled slightly lower, currently staying in the $77,000 range.

Bitcoin Price Has Increased... But Opinions Differ on Whether Investor Sentiment Has Recovered

Recently, Bitcoin’s price has increased as some regulatory uncertainties surrounding virtual assets in the United States have been resolved. On August 18 (local time), the U.S. Securities and Exchange Commission (SEC) announced a proposal for 'Regulation Crypto Assets,' specifying concrete criteria for virtual asset issuance and fundraising. Although the prospect of the comprehensive CLARITY Act, which would regulate U.S. virtual asset markets in a sweeping way, passing within this year remains limited, uncertainty has eased because the SEC is already addressing certain regulatory aspects discussed under the CLARITY Act within existing law.

The U.S. Treasury Department’s expansion of Treasury buybacks has also contributed to Bitcoin’s price increase. To combat a surge in long-term interest rates, the Treasury doubled the size of 10-to-30-year Treasury buybacks to a minimum of $4 billion per round. This has highlighted the so-called 'debasement trade,' in which funds flow into tangible and alternative assets such as gold and Bitcoin.

With the Kimchi Premium turning positive, some analysts suggest that individual investor sentiment has recovered. Rachael Lucas, a BTC market analyst, told Bloomberg News, "Korean retail investors tend to buy aggressively when risk appetite is high, and that buying is reflected in the price gap," adding, "Historically, when there’s a switch from discount to premium, it has been followed by several weeks of stronger returns."

Conversely, others argue it is premature to judge the Kimchi Premium as a direct sign of recovering investor sentiment. Minseung Kim, head of research at Korbit, stated, "Because capital cannot move freely between the domestic and overseas virtual asset markets, price discrepancies can occur at any time. The Kimchi Premium may appear not only when domestic buying is strong, but also when Bitcoin prices plummet overseas," adding, "The current Kimchi Premium could be seen as the result of resurgent investor sentiment and a rush to buy as Bitcoin prices rise again. On the other hand, it may also simply have resulted from the minor pullback following Bitcoin’s breakthrough of the $80,000 mark."

This content was produced with the assistance of AI translation services.