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South Korea’s bitcoin kimchi premium surged to a 10-month high, reaching 9.7% amid a broader cryptocurrency market sell-off. The premium, which is the gap in bitcoin’s price on South Korean exchanges compared to other markets, has not been this high since April 14, 2024, when it exceeded 13%. At the time of reporting, the premium has slightly decreased to 8.24%.
According to the Block, the kimchi premium is particularly notable because the South Korean cryptocurrency market is relatively isolated due to strict capital controls that deter foreign investment and penalize local investors for arbitrage activities. This can lead to significant price discrepancies between South Korean exchanges and those abroad.
Presto Research provided insights into the phenomenon, explaining that the kimchi premium often escalates in bull markets as Korean investors drive prices up. However, it can also spike during market downturns, as seen recently, when there is less selling pressure on Korean exchanges than in the global market.
The recent spike in the kimchi premium coincides with an announcement over the weekend by U.S. President Donald Trump regarding new severe tariffs on imports from Canada, Mexico, and China. This announcement has heightened investor concerns about a potential extended trade war and its impact on U.S. inflation.
In the last 24 hours, the cryptocurrency market experienced significant turmoil, with over $2.1 billion in liquidations, as per Coinglass data. Despite the current elevation in the kimchi premium, analysts from Presto Research suggest that it may normalize to its historical average of around 5% if the market stabilizes and recovers.
South Korea remains a major hub for cryptocurrency trading, with a strong emphasis on altcoins. Upbit, one of the country’s leading exchanges, was the fourth-largest centralized exchange worldwide by monthly volume in January, handling over $187 billion in transactions.
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