Wednesday, March 6, 2024: Bitcoin price is currently at $66,896, experienced a surge, briefly reaching a new high of $72,504 on March 5, 3:00 pm (UTC), on Upbit, South Korea’s largest cryptocurrency exchange. The price gap is known as the Kimchi Premium or Korea Premium Index, rising in tandem with BTC since February.
The Korea Premium index, tracked by on-chain data resource CryptoQuant, rose from 5.19 on Feb. 28 to 6.84 on March 5. This coincided with Bitcoin reaching a new all-time high above $69,200 on the same day, propelled by ongoing inflows into United States Bitcoin ETFs. Analyst Ho Chan Chung attributed the BTC rally to institutional demand in the U.S., contrasting with South Korea, where retail spot buying mainly influences the rising Bitcoin price.
The Kimchi premium was first noted in 2016 and gained attention in a 2019 paper from the University of Calgary, highlighting higher prices on South Korean Bitcoin exchanges compared to those in the U.S. In Bitcoin’s bull run in December 2017, South Korean exchanges traded Bitcoin nearly 50% higher than global exchanges, leading CoinMarketCap to remove some Korean exchanges due to “extreme divergence in prices.”
During the 2021 bull run, the Kimchi premium peaked at 21.56% on May 19 when Bitcoin traded above $36,000 before reaching its previous all-time high in November 2021. While some traders may seek arbitrage opportunities, the premium persists due to market inefficiencies, especially during strong uptrends.
Amid the increasing interest in Bitcoin, South Korea’s financial watchdog is reportedly considering permitting spot Bitcoin ETFs, potentially eliminating the price difference if approved. Lee Bok-hyun, governor of the Financial Supervisory Service, expressed positive sentiments about virtual assets, stating, “We are internally discussing it.”
In January, South Korea’s financial authorities indicated no plans to regulate Bitcoin futures ETFs but suggested that brokerage sales of spot Bitcoin ETFs could violate the Capital Markets Act.
As of the latest update, the Korea Premium Index remains, with Bitcoin trading around 93,800,000 KRW ($70,000) on Upbit, while BTC price elsewhere hovers around $67,000. The situation underscores the dynamic nature of Bitcoin pricing in different markets, with regulatory considerations potentially impacting the persistence of regional premiums.
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