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The Kimchi Prize Is A Blessing And Curse For The Cryptocurrency Market

The kimchi prize is a blessing and curse for the cryptocurrency market, some of its participants say. The recovery in the Korean premium has been observed since the beginning of this year, when Bitcoin made a vertical breakout of the $ 35,000 level. It recently reached its highest values ​​in a full year, after falling into negative territory in the last December.

The kimchi premium is understood as the excess of prices on the South Korean cryptocurrency exchanges over the average market ones. The emergence of the award indicates a high interest in bitcoin among traders in the country. The monetary system of South Korea is notable for its closed nature, which complicates the process of arbitration on exchanges, so there is no leveling of the exchange rate. At the same time, the premium hitting a record 54% in early 2018 coincided with the peak of the hype, after which the market plunged into a long-term bearish trend.

 

“I think this is a pure indicator of retail FOMO, as the BTC / KRW pair carries significant complications from an arbitrage perspective,” explains Ki Yong Joo, CEO of CryptoQuant analytics platform.

 

According to CryptoQuant, it will now be 12% more expensive to buy bitcoin on an exchange in South Korea than anywhere else.

 

“Bitcoin fundamentals still look promising, but I’m worried about the Korean bubble,” adds CEO CryptoQuant. “Shitcoin prices are skyrocketing, and the cryptocurrency market in Korea has surpassed the national stock exchange in terms of trading volume.”

 

In March, the South Korean edition of Hankyung did report that the total trading volume of the country’s four leading cryptocurrency exchanges – Upbit, Bithumb, Coinone and Kobit – amounted to $ 14.6 billion, which exceeded the average daily transaction volume of the KOSPI index and the national KOSDAQ exchange.

At the same time, the share of South Korean crypto exchanges in the global bitcoin trading volume is now small – only 1.7% – so Zhu expects that even if the “Korean bubble” bursts, the effect on the broader crypto market will be negligible.

Explaining why the premium suddenly fell in February, he writes:

 

“At this time, the Koreans were just a little late to continue the trend. Even my mom doesn’t ask me to buy bitcoin. There is now retail FOMO among Korean retail investors, but their strength is insignificant compared to January 2018. The question is whether this is happening all over the world or only in South Korea. ”

 

At the same time, the CEO and investment director of Three Arrows Capital crypto fund Su Zhu argues that people underestimate the renewed demand for cryptocurrencies from Koreans, and sees this as a positive signal for further price increases.

 

“The premiums are now more than 10%, but can easily rise to 100%, given the fact that arbitration has become even more difficult than last time. This, in turn, creates a major feedback loop for cryptocurrency prices in general, ”he says.

 

Su Joo also wondered which derivatives exchange would be the first to dare to launch perpetual Bitcoin / Korean Won futures, given the country’s illegality.

 

“Will there be a demand?” – Sam Bankman-Fried, CEO of a large crypto derivatives exchange FTX asked a counter question.

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