Bitcoin ‘kimchi premium’ is back as South Korean market stirs

Cryptocurrency
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(Sept 1): Bitcoin is again trading at a premium in South Korea, after a rally in token prices reignited risk appetite in one of crypto’s most closely watched retail markets.

The bitcoin price in won on Upbit, South Korea’s largest cryptocurrency exchange owned by Dunamu Inc, showed a roughly 1% premium over the dollar price from Binance Holdings Ltd on Tuesday. The largest cryptocurrency has traded at a premium in Korea for the past week, the longest sustained streak since early May.

Known as the “Kimchi premium”, the gap between bitcoin prices on South Korean exchanges and global markets is viewed as a key barometer of retail investor mood across Asia. Its reappearance has presaged further bitcoin gains in the past, said Rachael Lucas, an analyst at BTC Markets. 

“Korean retail tends to buy aggressively in risk-on phases and capital controls mean that buying shows up as a price gap rather than arbitrage flow,” said Lucas. “Historically, discount-to-premium crossings have preceded stronger bitcoin returns over the following weeks.”

The return of the premium comes as bitcoin enters September at around US$79,000, after briefly crossing US$80,000 last month for the first time since May. Prices surged in August on renewed crypto optimism and the US Treasury’s decision to increase buybacks of longer-dated government bonds, leading to the strongest monthly advance for bitcoin since November 2024.

As prices climbed, appetite for US-listed spot bitcoin exchange-traded funds returned. The ETFs attracted about US$1.92 billion (RM7.75 billion) in the week of Aug 17, their strongest weekly inflow in 10 months. They pulled in another US$923 million last week, although US$203 million in outflows on Aug 28 snapped a nine-day inflow streak.

While US ETF flows increasingly reflect institutional demand, the price gap on South Korean exchanges has historically been associated with domestic retail buying. The spread can persist because local capital controls and other financial regulations make it difficult to arbitrage price differences quickly.

Still, the Kimchi premium is susceptible to speculative fervour and not a guarantee of another leg higher.

While the Kimchi premium has turned positive, “without a corresponding pickup in spot volumes, we don’t think Korea will be a major driver in the initial stage of a bitcoin rebound, with many Korean traders still focused on AI stocks,” said Markus Thielen, head of 10x Research.

Kimchi discount

Until recently, the signal coming out of South Korea pointed in the opposite direction. Bitcoin traded at a discount in the country for much of the summer, reaching as low as 3.1% below international prices in early June The average discount for August was 0.25%

With ETF flows already softening at the end of August, the pickup in South Korea could still prove to be a short-lived burst of retail enthusiasm.

“Korea’s bitcoin-specific share of global volume remains modest, so this is a small signal, an easing of Korean selling pressure, not a new Fomo wave,” Lucas said, using the acronym for “fear of missing out”. “US institutional and ETF flows still dominate price action.”

Source: www.theedgemarkets.com