Bitcoin’s ‘Kimchi Premium’ Shrinks Amidst South Korea’s Fading Crypto Fervor

• The decline in South Korea’s Kimchi Premium signals shifting sentiments in the country’s crypto market.
• Limited local supply exacerbates price gaps, contributing to fluctuations in the Kimchi Premium.
• Decreased trading volumes on top South Korean exchanges reflect subdued market activity amidst global events.

The Kimchi Premium, often regarded as a gauge of South Korea’s interest in cryptocurrencies, has been consistently decreasing, hitting 1.54% on a recent Friday afternoon in Asia. This metric reflects the variance in Bitcoin prices between South Korea and other global markets and has experienced a notable decline since mid-April, signaling a notable change in the country’s cryptocurrency scene.

This decline in the Kimchi Premium can be attributed to various factors influencing South Korea’s crypto market. One key element is the restrictive nature of the market itself, which limits foreign investors’ access. Local investors engaging in arbitrage face potential legal repercussions under the Foreign Exchange Transactions Act if they buy large volumes of crypto from foreign exchanges.

Moreover, South Korea’s limited local supply of cryptocurrencies exacerbates price discrepancies. During periods of heightened demand, such as observed in March when the premium reached its peak at 11.44%, the gap widens due to an imbalance between the supply and demand of Bitcoin.

A notable trend accompanying the decrease in the Kimchi Premium is the reduced trading volumes on South Korea’s top crypto exchanges, including Upbit, Bithumb, Coinone, Korbit, and Gopax. These exchanges, which dominate the local market, collectively recorded a trading volume of $2 billion in the past 24 hours, significantly lower than the nearly $18 billion reported on March 6, according to CoinGecko data.

Several factors may have contributed to the dampened enthusiasm for cryptocurrencies in South Korea. Events such as the conflict in the Middle East and continued net outflows in U.S. spot Bitcoin exchange-traded funds (ETFs) could have influenced investor sentiment. 

Additionally, the lack of significant events highlighting Bitcoin’s value since the halving occurred last month may have contributed to subdued market activity. With Bitcoin priced at $62,974.01 , marking a 3.24% increase in the last 24 hours. The cryptocurrency’s trading volume over this period stands at $25,433,969,068, showcasing robust market activity within the day.