Bitcoin’s Kimchi Premium Surges to 10%, Signals Concerns for BTC Short-Term
Trading volumes on major Korean cryptocurrency exchanges have significantly decreased, hinting at reduced retail trading activity.
What You Should Know:
- Premiums of an infamous bitcoin trade popularized by Sam Bankman-Fried have returned to notable levels.
- Trading activity on Korean exchanges Bithumb and Upbit has witnessed a significant decline recently.
The so-called Kimchi premium, the difference in bitcoin prices on Korean exchanges compared to global markets, increased to over 10% amidst a bitcoin drop of 6% within 24 hours.
The arbitrage strategy involves purchasing bitcoin on global exchanges and selling it on Korean exchanges for profits in Korean won, although withdrawing actual profits can be challenging due to South Korea’s stringent capital controls.
Bradley Park, a Seoul-based analyst, mentioned:
“It seems that most retail investors are either already fully invested in spot or have withdrawn their funds to engage in DEX activities.” (Translation: It appears that most retail investors are either already fully invested in trading or have withdrawn their funds to participate in decentralized exchange activities.)
Additionally, the quote from Park:
“The kimchi premium can surge excessively when trading volume increases, but it can also help defend prices when asset prices on overseas exchanges drop significantly, which is likely not a positive sign in the short-term for bitcoin.” (Translation: The kimchi premium may rise dramatically when trading volumes go up, but it can also assist in supporting prices when assets on global exchanges see a significant decline, which seems to be an unfavorable indication for bitcoin in the near term.)
