Kimchi premium refers to the phenomenon in the cryptocurrency market where the price of a particular digital asset, such as Bitcoin or Ethereum, is significantly higher on South Korean exchanges compared to global exchanges.
This price disparity creates an opportunity for traders to profit by purchasing the cryptocurrency on exchanges where the price is lower and selling it on South Korean exchanges where the price is higher, capitalizing on the price difference. The term “Kimchi premium” is derived from the popular Korean dish, kimchi, emphasizing its local nature.
Several factors contribute to the existence of Kimchi premium, including capital controls in South Korea, limited arbitrage opportunities, and high demand for cryptocurrencies among the local population. Cryptocurrency enthusiasts and traders closely monitor the Kimchi premium as it can provide insights into market sentiment and potential arbitrage opportunities.
However, regulatory changes and increased global market integration have led to fluctuations in the Kimchi premium, making it a dynamic aspect of the cryptocurrency market that traders need to navigate carefully.