[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 in Korea than abroad, has returned. There are divided interpretations, with some seeing it as a sign of recovering investor sentiment, and others suggesting it is an illusion created as Bitcoin's sharply increased price undergoes a slight correction.

Yonhap News Agency

Bitcoin Is More Expensive in Korea Than Overseas... Premium Emerges

According to the on-chain data platform CryptoQuant on September 4, the Bitcoin kimchi premium index stood at 0.10 on September 2. This index represents the percentage difference in Bitcoin prices between Korea’s five major KRW-based exchanges, such as Upbit and Bithumb, and 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.

Until recently, the kimchi premium index was in negative territory. As of September 1 this year, the index recorded a negative value on 137 out of 244 days, more than a month longer than the number of days with a positive value. This reverse kimchi premium persisted for 35 consecutive days from June 20 to July 24, which was a longer period than the 30 consecutive days between May 20 and June 18. The previous record was 23 consecutive days, from July 8 to 30 last year.

The trend began to shift on August 25. The kimchi premium index, which had been negative for eight consecutive days until August 24, turned positive with a reading of 0.59 on August 25. Except for August 27, when it dipped to -0.16, the index remained positive and reached 1.10 on September 1. The average value of the kimchi premium index from August 25 to September 2 was 0.49.

The kimchi premium index tends to rise when Bitcoin’s price increases. Since May, except for May 6 (-0.56), the index remained mostly positive but entered a distinctly negative phase beginning May 13 (-0.38). Bitcoin’s price surged to $82,018.37 on May 11, but quickly fell, dropping to around $60,000 by June.

This time as well, the formation of the kimchi premium coincided with a rise in Bitcoin’s price. While hovering at the $60,000 level, Bitcoin surpassed $80,000 during trading on August 25, reaching $80,638.20. It then eased slightly and is now maintaining the $77,000 range.

Bitcoin Price Rises, but Opinions Split on Recovery of Investor Sentiment

Recently, Bitcoin’s price climbed as some uncertainty about U.S. cryptocurrency regulations was alleviated. On August 18 (local time), the U.S. Securities and Exchange Commission (SEC) announced a proposed "Regulation Crypto Assets," which specifies concrete standards for virtual asset issuance and funding. While the prospects for the passage of the comprehensive CLARITY Act, a bill aimed at regulating the structure of the U.S. crypto market, remain limited this year, uncertainty has eased as the SEC moved to address certain regulatory areas under current laws that are also discussed in the CLARITY Act.

The U.S. Department of the Treasury’s move to expand the size of Treasury buybacks (early redemptions) also pushed Bitcoin’s price higher. The department doubled the buyback size for 10- to 30-year Treasuries to a minimum of $4 billion per round to counter the surge in long-term rates. As a result, the so-called "debasement trade," where funds move to real and alternative assets such as gold and Bitcoin, has gained traction.

The reversal of the kimchi premium into positive territory has prompted some analysts to suggest that personal investor sentiment is recovering. Rachael Lucas, BTC market analyst, told Bloomberg News, "Korean retail investors have a tendency to buy aggressively during risk-on phases, a dynamic that is reflected in the price gap. Historically, periods when the discount shifted to a premium have led to even stronger returns in the weeks that followed."

On the other hand, some argue that it is premature to conclude that the return of the kimchi premium signals a full recovery in investor sentiment. Kim Minseung, head of the Korbit Research Center, said, "The price gap can always occur since capital flows between domestic and overseas crypto markets are not completely free; the kimchi premium can materialize not only when local buying is strong, but also when Bitcoin prices fall sharply overseas. This time, the emergence of the kimchi premium may be the result of a wave of buying driven by a renewed bullish view of Bitcoin’s price, but conversely, it may simply be a phenomenon that appeared as the price eased after breaking past the $80,000 mark."

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