The ‘Kimchi Premium’, which exceeded 10% in March when Bitcoin surged, has almost disappeared. The Kimchi Premium indicates how much more expensive Bitcoin is traded in South Korea compared to overseas.
Despite positive developments such as the rise in support for former U.S. President Donald Trump and the approval of an Ethereum spot ETF, the investment sentiment in the S. Korean cryptocurrency market appears to be struggling to recover.
As of 3 PM on July. 22, the price of Bitcoin on Binance, the world’s largest cryptocurrency trading platform, was $67,454. Reflecting the current exchange rate of the Korean won against the US dollar, the price converted to won is 93.64 million won. At the same time, on the largest S. Korean exchange, Upbit, Bitcoin was trading at 94.03 million won. This means the current Kimchi Premium is around 0.4%.
The Kimchi Premium is often seen as an indicator of how enthusiastic S. Korean investors are about cryptocurrencies.
The term became widely used in 2017 when investor interest in cryptocurrencies grew, and the demand for Bitcoin in Korea increased, causing the price in won to significantly exceed the price in dollars. In 2021, when the global cryptocurrency market heated up, the Kimchi Premium exceeded 10%.
After the U.S. Securities and Exchange Commission (SEC) approved a Bitcoin spot ETF earlier this year, the cryptocurrency market rebounded, and the Kimchi Premium also showed an upward trend again.
According to Meritz Securities, the Kimchi Premium surpassed 10% on Mar. 16, reaching its highest level in about two years and ten months since May. 2021. At that time, the price of Bitcoin in Korea reached 102.4 million won.
However, after April, as interest in the cryptocurrency market declined, the Kimchi Premium also began to decrease. Even after Bitcoin’s halving (when the mining reward is halved) on Apr. 19, the cryptocurrency market showed weakness, and in June, the price of Bitcoin in Korea fell to the early 80 million won range as the U.S. Federal Reserve indicated it might delay lowering interest rates.
Recently, Bitcoin prices have noticeably rebounded. This is largely due to the global demand for Bitcoin investment surging after former President Donald Trump, running as a Republican candidate in the upcoming November U.S. presidential election, was shot and his chances of winning increased.
Trump has consistently made cryptocurrency-friendly statements during his campaign, leading to analysis that if he is elected, U.S. financial authorities may actively move to ease regulations.
Following Bitcoin, approving a spot ETF based on Ethereum has also been a positive factor for the cryptocurrency market. According to Reuters, the SEC made an approval for Ethereum spot ETFs submitted by at least three US asset management companies.
