[Bitcoin Now] Kimchi Premium Profit-Taking Causes Plunge to 72 Million Won Range

Kimchi Premium Bubble Bursts, East Asian Demand Plummets
Impacting Cryptocurrency Prices Worldwide

On the morning of the 6th, the Bitcoin price is displayed on the Upbit Lounge cryptocurrency exchange price board in Gangnam-gu, Seoul. [Image source=Yonhap News]

[Asia Economy Reporter Gong Byung-sun] Bitcoin, the representative virtual currency (cryptocurrency) that had risen to the 79 million KRW range, has dropped to the 72 million KRW range. This appears to be due to large investors realizing profits through the 'Kimchi Premium' (the phenomenon where domestic cryptocurrency prices are higher than overseas prices).

According to the domestic cryptocurrency exchange Upbit, as of 1:36 PM on the 8th, Bitcoin recorded 71.67 million KRW, down 1.61% from the previous day. Starting from the 31st of last month, it continuously broke all-time highs and rose to 79.42 million KRW the day before, but suddenly plunged by about 7 million KRW. During the previous day’s trading session, it even fell to 68.77 million KRW.

There is an analysis that large investors realized profits by utilizing the 'Kimchi Premium.' Joo Ki-young, CEO of cryptocurrency analysis firm CryptoQuant, claimed on Twitter the day before that he had detected evidence of large investors moving to domestic cryptocurrency exchanges. He explained, “The 30-minute trading volume on Upbit surpasses that of the U.S. cryptocurrency exchange Binance, and inflows to Bithumb have also increased. Considering the average inflow to all exchanges is decreasing, it can be seen that large investors are moving to domestic cryptocurrency exchanges.”

Concerns about a bubble have steadily emerged as the 'Kimchi Premium' grew. Especially as domestic investors massively flowed into the cryptocurrency market, the Kimchi Premium rose to the 20% range on the 7th. Ha Dae-hoon, a researcher at SK Securities, pointed out, “A high Kimchi Premium is a burdensome factor, and adjustments may occur in the process of narrowing the premium gap.” In fact, as Bitcoin plunged that day, the Kimchi Premium shrank to the 8% range.

The crash caused by the 'Kimchi Premium' appears to have affected overseas markets as well. On the 7th, cryptocurrency specialized foreign media CoinDesk analyzed that the crash due to the Kimchi Premium led to a global decline in Bitcoin prices. It explained that as Bitcoin prices in South Korea plummeted, cryptocurrency demand within the East Asian region disappeared. In fact, Bitcoin traded on Binance fell 3.51% during the day on the 7th.

Nevertheless, large companies are entering the cryptocurrency market. According to U.S. economic media CNBC on the 7th (local time), major U.S. real estate company Caruso Properties announced it would accept rent payments in Bitcoin. Rick Caruso, CEO of Caruso Properties, said, “Looking at the long term, investing in Bitcoin is reasonable, and if customers pay rent with cryptocurrency, it will lead to building a cryptocurrency ecosystem.” Caruso Properties also announced that it has partnered with the U.S. cryptocurrency exchange Gemini to enter the cryptocurrency market.