The South Korean capital controls pushed the benchmark cryptocurrency above $66,600 marking a 15% difference than on the global markets so let’s read more in our latest BTC news today.
The so-called kimchi premium struck South Korea once again as the local BTC price is now 15% higher than elsewhere on the planet.
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Fueled by the high demand for BTC but the low supply on local exchanges, BTC is now trading for $66,633 in the country’s exchanges. The South Korean capital controls caused the arbitrage according to the analysts.
Bitcoin’s price on global markets is now hovering around $59,000 but not if you live in South Korea. One BTC there trades for $66,633 and the pair with the Korean won shows that the price of the cryptocurrency is now at 75,166,000 won. This marks a difference of 15% compared to the BTC/USD pair on global exchanges like Coinbase or Binance. the gap is called the kimchi premium which is named after the popular Korean dish of pickled vegetables.
Remember when the $BTC market collapsed with a 50% kimchi premium back in 2018?
Simply calculating the trading volume, the Korean market had 7.9% of the influence as of 2018 January, while today it is only 1.7%.
— Ki Young Ju 주기영 (@ki_young_ju) April 4, 2021
The kimchi premium happens because the exchanges don’t have enough crypto to meet the demand which is only happening due to the country’s restrictions on capital flows. The government makes it quite hard to send the national currency to other countries which is even trickier for exchanges to keep the money flowing. The delays created a backlog of demand and pumped up the BTC price. there’s tons of demand as well because a third of the workers in the country own BTC even in 2017 and new registrations increased by 76% last year. one analyst at Arcane Research Vetle Lunde said:
“Especially during bull markets, the kimchi premium tends to happen as South Korean retail speculators FOMO into the markets.”
The kimchi premium of 15% is still lower than the massive premiums in 2017 and 2018 as per Lunde. When the kimchi premium fell to a discount, Bitcoin was cheaper to purchase in South Korea than in any other place. according to the head of business development in Asia Doo Wan Nam, the kimchi premium reappeared because of the high demand for BTC but there wasn’t sufficient supply of the coin on the exchanges in the country.
To clarify, based on previous law cases, arbing crypto itself is not illegal in Korea. However, sending money abroad without reporting the government is a crime. Generally when it's over $1 million worth over the course of arbing. Here are some previous cases 👇
— Doo (@DooWanNam) April 5, 2021
Often there’s a smaller premium on the purchase due to conversion rates but as global traders jump on these exchanges to make profits, the gap closes very fast which is called “arbing.” Lunde concludes:
“With premiums growing at this scale, should expect that traders find a way to close the spread—despite the risks associated.”
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