Kimchi Premium Definition
Kimchi Premium refers to the gap in cryptocurrency price, particularly Bitcoin, in South Korean exchanges compared to foreign exchanges. The term is derived from a popular Korean dish, Kimchi, and is used to indicate the extra price South Korean traders pay for Bitcoin on South Korean exchanges.
Kimchi Premium Key Points
- Kimchi Premium is a phenomenon observed in South Korean cryptocurrency markets where digital assets like Bitcoin are traded at higher prices than in other global markets.
- The premium is a result of high demand and strict capital controls in South Korea, which restrict the amount of foreign currency that can be purchased or sold.
- The Kimchi Premium is not exclusive to Bitcoin and can be observed with other cryptocurrencies as well.
- It is considered an indicator of market sentiment in South Korea, one of the world’s largest cryptocurrency markets.
What is Kimchi Premium?
Kimchi Premium is a term used in the cryptocurrency market to describe the difference in the price of Bitcoin and other cryptocurrencies on South Korean exchanges compared to foreign exchanges. This phenomenon is named after the famous Korean dish, Kimchi, symbolizing the extra price or “premium” that South Koreans have to pay for Bitcoin and other cryptocurrencies.
Why does Kimchi Premium exist?
The Kimchi Premium exists due to a combination of high demand for cryptocurrencies in South Korea and the country’s strict capital controls. South Korea has regulations that limit the amount of foreign currency that can be bought or sold by individuals and companies. This makes it difficult for traders to arbitrage the price difference between South Korean and foreign exchanges, leading to higher prices on South Korean exchanges.
Where can Kimchi Premium be observed?
The Kimchi Premium can be observed on various cryptocurrency exchanges in South Korea. It is not exclusive to Bitcoin and can be seen with other cryptocurrencies as well.
When is Kimchi Premium observed?
The Kimchi Premium is typically observed during times of high market volatility and increased demand for cryptocurrencies in South Korea. It can fluctuate and even disappear at times, depending on market conditions and regulatory changes.
Who is affected by Kimchi Premium?
Primarily, South Korean cryptocurrency traders are affected by the Kimchi Premium as they have to pay more for the same cryptocurrency compared to traders on foreign exchanges. However, it also impacts global cryptocurrency markets as it can distort the overall price perception of cryptocurrencies.
How is Kimchi Premium calculated?
The Kimchi Premium is calculated by comparing the price of a cryptocurrency on South Korean exchanges to its price on foreign exchanges. The difference in price, expressed as a percentage, represents the Kimchi Premium.
