Key Points
- Bitcoin’s price reached a new high of $72,504 on South Korea’s largest cryptocurrency exchange, Upbit.
- The price difference between South Korean and US exchanges, known as the Kimchi Premium, is on the rise.
Bitcoin’s price reached a new high of 96,734,000 South Korean Won, equivalent to $72,504, on Upbit, South Korea’s largest cryptocurrency exchange, on March 5.
The Return of the Kimchi Premium
The price difference between South Korean and other global exchanges is referred to as the Kimchi Premium or Korea Premium Index. This index has been increasing alongside Bitcoin’s price since early February.
The Korea Premium index rose from 5.19 on February 28 to 6.84 on March 5, according to data from CryptoQuant. This increase coincided with Bitcoin’s price hitting a new all-time high of over $69,200 on March 5, largely due to continued inflows into United States’ Bitcoin ETFs.
The driving force behind Bitcoin’s price rally is institutional demand in the United States. However, in South Korea, the rising Bitcoin price is primarily driven by retail spot buying, as the country does not have spot Bitcoin ETFs.
The Kimchi premium was first noted in 2016 and highlighted in a 2019 paper from the University of Calgary. The researchers found that between January 2016 and February 2018, South Korean Bitcoin exchanges witnessed prices that were an average of 4.73% higher than exchanges in the United States.
South Korea Considers Spot Bitcoin ETFs
As interest in Bitcoin grows, South Korea’s financial watchdog is reportedly considering allowing spot Bitcoin ETFs in the country. If approved, this could potentially eliminate the price difference.
Lee Bok-hyun, governor of the Financial Supervisory Service, stated that they are discussing the matter internally. In January, South Korean financial authorities said they had no plans to regulate the sales of Bitcoin futures ETFs. However, they mentioned that brokerage sales of spot Bitcoin ETFs could violate the Capital Markets Act.
As of now, the Korea Premium Index remains intact with Bitcoin trading at around 93,800,000 KRW ($70,000) on Upbit, while Bitcoin’s price elsewhere is around $67,000.
