While Bitcoin spiked at a higher price, transcending the $54k level, South Korea’s “Kimchi Premium” has also returned to the digital assets market since the last week of March. According to Bitcoin.com, the price difference in the last week of April had risen 4.56% higher than most of the global cryptocurrencies. Korean exchanges like Korbit and Bithumb traded for $3k more than most of the foreign exchanges during the Kimchi Premium event and the Kimchi Premium arbitrage.
The “Kimchi Premium” first appeared back in 2016. It heated up the domestic market and the globals. And also resumed investors’ interest in cryptocurrency recently. The premium created arbitrage opportunities when Bitcoin trades at a higher price on South Korea’s exchanges. Investors could then take advantage of the Kimchi Premium arbitrage opportunities to gain profits.
The following parts will guide you through the details of the “Kimchi Premium”. Explore how it works and the process of Kimchi Premium arbitrage trading!
What is the “Kimchi Premium”?
The Kimchi Premium describes the price gap differences in cryptocurrencies between South Korean exchanges and other foreign exchanges. The situation mostly happens on the prices for Bitcoin, but sometimes also applies to other cryptocurrencies. Prices for cryptocurrencies, i.e. Bitcoin. Some exchanges in South Korea sell it at a higher price than other international platforms. It helps stimulate crypto trading when international investors in South Korea have more incentives to trade and earn profits with the price differences.
But why is there such a noticeable price difference in the same crypto coin?
Let us date back to 2017, prices of Bitcoin were still synced between South Korea and foreign countries until it spiked 30% at the end of the year. The price gap then appeared and began to become larger at the beginning of 2018. And according to Investopedia, the kimchi premium averaged nearly 4.80%. It was as high as nearly 55% in January 2018. The price discrepancy in Bitcoin is complex.
The speculated reasons might be led by the trading environment, namely related to the trading limitations in South Korea. There are regulatory limitations on traders. They limit them to buy digital assets at lower prices from foreign exchanges. Foreign traders also encounter the same restrictions on trading their crypto assets. The restrictions on the currency flow turned out to be one of the notable causes behind the Kimchi Premium.
How does the “Kimchi Premium” work?
When the cryptocurrency prices are at a higher price on South Korean crypto exchanges than other foreign exchanges due to Kimchi Premium, investors could earn extra profits from the “Kimchi Premium Arbitrage” opportunities.
Investors are able to earn profits from the price differential, by purchasing Bitcoin abroad then reselling it on South Korean exchanges. For instance, investors in Hong Kong can exchange BTC/USDT with HKD/USD. Then sell your cryptocurrency to Korean Won on South Korean exchanges, like Upbit and Bithumb. But only legal residents in Korea with a valid Korean phone number, bank account, and a government-issued ID card can exchange digital assets on Korean exchange platforms. Eventually, you could earn profits from the whole process, and which is called arbitrage. For example, you buy 1 BTC with HK$10,000 on the Hong Kong exchange. Then sell it at $15,000 on the South Korean exchange, you can eventually earn the above 65% price difference. And that is why investors in South Korea could take advantage of the Kimchi Premium by making use of the Korean market to gain profits.
Is it safe to invest under the “Kimchi Premium”?
Supposedly, Bitcoin should be traded at a similar price around the world. It does sound unsafe to investors when performing exchanges in South Korea, specifically, selling it at a higher rate than elsewhere around the world. In fact, the whole Kimchi Premium arbitrage process is not a scammy event. It is purely due to the price differential between South Korean exchanges and foreign exchanges. Crypto Pro is your one-stop OTC to capture and gain profits from the “Kimchi Premium”. You can earn 15%+ daily profit from the recent “Kimchi Premium”. We offer instant exchanges between cryptocurrencies and fiats, including exchanges between BTC/USDT and USD/HKD. Catch the arbitrage opportunities from Kimchi Premium and earn 15% more daily!!
Note that the cryptocurrency market always fluctuates, and every investment has a certain level of risk. Investors should always evaluate the associated risk level before investing in any of the investment options!