Bitcoin (BTC) briefly reached a record high of 96,734,000 South Korean Won or $72,504 on March 5th at 3:00 pm (UTC) on Upbit, the largest cryptocurrency exchange in South Korea.
The price difference, also known as the Kimchi Premium or Korea Premium Index, has been increasing along with the BTC price since early February. According to on-chain data resource CryptoQuant, the Korea Premium index rose from 5.19 on February 28th to 6.84 on March 5th.
This increase in the premium coincided with Bitcoin reaching a new all-time high above $69,200 on March 5th, driven by continued inflows into United States’ Bitcoin ETFs. While the Bitcoin price rally in the United States is mainly driven by institutional demand, in South Korea, the rising Bitcoin price is mainly driven by retail spot buying.
The Kimchi premium was first observed in 2016 and gained attention in a 2019 paper from the University of Calgary. During the bull run in December 2017, South Korean exchanges were trading Bitcoin nearly 50% higher than most exchanges worldwide, leading CoinMarketCap to remove some Korean exchanges due to extreme price divergence.
During the current bull run in 2021, the Kimchi premium reached its peak at 21.56% on May 19th. Some traders attempt to profit from these price differences through arbitrage, but the premium mainly remains due to market inefficiencies.
Amid the growing interest in Bitcoin, South Korea’s financial watchdog is reportedly considering allowing spot Bitcoin ETFs in the country, which could potentially end this price difference if approved. The governor of the Financial Supervisory Service stated that they are internally discussing it.
At the time of writing, Bitcoin is trading at around 93,800,000 KRW ($70,000) on Upbit, while the BTC price elsewhere is around $67,000.
Please note that this article does not provide investment advice or recommendations. Readers should conduct their own research and make their own decisions regarding investments and trading moves as it involves risk.