South Korea’s cryptocurrency market is experiencing a resurgence with trading volumes on domestic exchanges surpassing those of the local stock market last week. This surge coincides with a rise in the “Kimchi Premium,” the price difference between Bitcoin on Korean exchanges and global platforms which reached a two-year high of 10.32% this week.
According to reports from local media, the total trading volumes on South Korea-based cryptocurrency exchanges reached a record high of 11.8 trillion won (KRW). This amount is equivalent to $9 billion based on the current USD-KRW exchange rate. The 24-hour trading volume for domestic virtual assets reached KRW 11.8543 trillion slightly surpassing the KOSPI market’s trading volume of KRW 11.4794 trillion on February 8.
Analysts attribute the strong demand to South Korean retail investors buoyed by Bitcoin’s recent record-breaking price. Bitcoin surpassed its previous all-time high of reaching over $70,000 globally. On the South Korean exchange Upbit Bitcoin prices climbed even higher exceeding 97 million won ($72,926) on March 5, 3:00 pm (UTC).
Professor Cho Dong-geun from the Department of Economics at Myongji University commented on the situation stating,
Recently, the growth of our country’s economy has almost stopped. As a result, we are entering a fight over who will get the limited wealth without increasing added value, and we are flocking to specific investment assets such as virtual assets.
This renewed interest in cryptocurrencies among South Korean investors contrasts with the global market where institutional investment is believed to be the primary driver of Bitcoin’s price rally. The absence of spot Bitcoin ETFs in South Korea limits institutional participation leaving retail investors as the main buying force behind the surge.
“Kimchi Premium” presents a potential arbitrage opportunity for traders but South Korean regulations restrict foreign investors’ participation and penalize domestic traders buying large volumes from overseas platforms. South Korea has a long history of fervent cryptocurrency trading activity.
During the 2017-18 bull run, Korean exchanges witnessed Bitcoin prices nearly 50% higher than global averages prompting CoinMarketCap to remove some Korean exchanges from their listings. The current surge reignites discussions about introducing spot Bitcoin ETFs in South Korea which could potentially reduce the price premium if approved.
