Bitcoin Kimchi Premium Declines 1.54% With Lower Trading

The Bitcoin Kimchi Premium, the price difference between Bitcoin (BTC) on South Korean exchanges and global platforms, has seen a steady decline over the past four weeks. 

According to CryptoQuant data, this premium dropped by 1.54% on Friday. This metric highlights the unique pricing dynamics in South Korea, where local demand and regulatory conditions often cause Bitcoin to trade at higher prices compared to international markets.

The drop in the Kimchi Premium coincides with a decrease in trading volumes on South Korea’s top five cryptocurrency exchanges: Upbit, Bithumb, Coinone, Korbit, and Gopax. Collectively, according to CoinGecko data, these exchanges recorded a trading volume of $2 billion in the past 24 hours, a sharp decline from the $18 billion reported on March 6. This reduction in trading activity indicates a waning interest among local investors, influenced by recent geopolitical and market developments.

Factors Contributing to the Kimchi Premium

The Kimchi Premium is a phenomenon driven by several factors unique to the South Korean market. Strict financial controls and favorable trade regulations create a limited local supply of cryptocurrencies. High demand, coupled with regulatory restrictions on foreign investors, often leads to significant price gaps. Traders have historically exploited these differences through arbitrage, buying Bitcoin on foreign exchanges at lower prices and selling on South Korean exchanges at higher rates.

However, local investors face stringent penalties under the Foreign Exchange Transactions Act if caught engaging in arbitrage. This regulatory landscape maintains the premium but also limits investors’ ability to capitalize on price discrepancies fully.

Impact of External Factors on Market Sentiment

Recent events, both regional and global, have contributed to the decline in trading volumes and the Kimchi Premium. The ongoing Middle East crisis has negatively impacted business operations and investor confidence, contributing to a bearish market outlook. 

Additionally, the performance of U.S. spot Bitcoin exchange-traded funds (ETFs) could be better, with many not registering any inflows or outflows in recent weeks. On May 8, only Bitwise’s Bitcoin ETF (BITB) recorded inflows of about $12 million, highlighting the broader market’s subdued sentiment.

Current Bitcoin Market Outlook

According to CoinMarketCap data, Bitcoin was trading at $60,492 at press time, reflecting a 2.48% decrease over the last 24 hours. The decline in the Kimchi Premium and reduced trading volumes suggest a period of consolidation rather than a strong bullish trend. Historically, a lower Kimchi Premium has indicated less buying pressure from South Korean investors, often coinciding with broader market corrections.

BTC/USD 1-day price chart (Source: CoinMarketCap)

In March, the Kimchi Premium surged to 11.44% as Bitcoin reached a new all-time high above $73,000. This period of high premium reflected strong local demand and optimistic market sentiment. However, as Bitcoin’s price corrected below $70,000, the premium began to decline, mirroring the overall market downturn.