Key Points
- The ‘Kimchi Premium’ for Bitcoin in South Korea has decreased to 1.54%, indicating a decline in cryptocurrency interest.
- South Korea’s top five crypto exchanges have seen a significant drop in trading volumes.
Bitcoin’s price gap in South Korea, commonly known as the ‘Kimchi Premium’, has seen a steady decrease since mid-April.
This premium, which represents the price difference of Bitcoin or other cryptocurrencies in South Korea compared to other markets, was at 1.54% on Friday afternoon, as per data from CryptoQuant.
Why the Kimchi Premium Exists
The Kimchi Premium is a result of South Korea’s cryptocurrency market being inaccessible to foreign investors.
In addition, local investors who purchase large volumes of cryptocurrencies from overseas exchanges for arbitrage could face penalties under South Korea’s Foreign Exchange Transactions Act.
As South Korea’s local supply of cryptocurrencies is limited, a spike in demand often results in a larger price gap.
In March, the premium hit a high of 11.44% when Bitcoin reached a new all-time high.
Decreased Trading Volumes
The decrease in the Kimchi Premium coincides with a reduction in trade volumes on South Korea’s top five cryptocurrency exchanges.
These exchanges, which include Upbit, Bithumb, Coinone, Korbit, and Gopax, dominate the local market.
According to CoinGecko data, the combined trading volume of these five exchanges was $2 billion in the past 24 hours.
This figure is significantly lower compared to the nearly $18 billion reported on March 6.
Several factors may have contributed to South Korea’s diminished enthusiasm for cryptocurrencies.
These include geopolitical tensions in the Middle East and continued net outflows in U.S. spot Bitcoin exchange-traded funds.
Additionally, there have been few events showcasing Bitcoin’s value since the last halving event.
At the time of writing, Bitcoin was trading at approximately $63,018, up 2.9% over the past 24 hours.
