As the price of Bitcoin continues to climb up, so does the popular Kimchi premium.
As of writing, the price of Bitcoin is $59,063 on Binance and $59,087 on Coinbase Pro, but the highest price of BTC is on South Korean exchanges, which is up more than 5.5% than other platforms.
$62,368 is the highest on Upbit, on Coinone BTC price is $62,022, $61,738 on Bithumb, and $61,628 on Korbit, as per CoinMarketCap. The same is the case for Ether which is firmly trading above $1,900 on South Korean crypto exchanges as high as $1,941 compared to $1,844 on Coinbase.
The premium on both Bitcoin and Ethereum was first seen during this bull market earlier in 2021, and it continues to soar as prices go higher and higher.
“Korean premiums in both BTC & ETH surged to 2021 highs on the dip below $54k last week. As prices plummeted, Asian investors aggressively scooped up Bitcoin & Ethereum, creating near record-breaking 9.48% & 9.61% premium percentages over Western exchanges year-to-date,” noted The TIE.
However, the South Korean market’s capital controls are making it hard to capitalize on this arbitrage opportunity.
In an interview with The TIE, Alex Friedberg and JJ Petersen, co-founder at BXB Capital, shared the situation around the Kimchi premium and how they managed to make more than $1 million a day in 2017 because of this.
“Korea is a very capital control heavy country,“ said Friedberg noting how if you are a Korean, there are limitations and a lot of restrictions on money that you can wire outside of the country.
“Korea is a very isolated ecosystem, and so if you’re trying to connect the global crypto ecosystem or even global financial services, there are very strict and few routes that you can go through.”
While in 2017, when the premium first came into the scene, they were able to make a fortune on it, at the beginning of 2018, a lot more guidelines from the Korean Financial Intelligence Unit (FIU) have been introduced. Banks were also asked not to process any types of crypto-related transactions.
“So, there’s a lot of government pressure to tighten up the capital controls again because it just got so blown out crazy,” and it made arbitrage really difficult.
Also, with everyone from uncles and aunties getting in crypto, and because Korea is very protective of their citizens in terms of investment losses, authorities wanted to curb all the craziness through more tightening of restrictions and policies on the exchanges.
Last year, new legislation was introduced to provide a framework for the regulation and legalization of crypto, and exchanges were also passed.
Crypto activity that has been subdued has also started to reemerge this year. Just a couple of weeks back, South Korean crypto volume beat its stock market numbers. Also, there have been reports of Morgan Stanley participating in the acquisition of Bithumb.