'Kimchi premium': All about Korean crypto mania
Korea Composite Stock Price Index (KOSPI) Photograph:( Reuters )
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Around the world, crypto trading is still a small-scale activity, mostly enjoyed by extremely risk-tolerant individuals, however, it has been very popular in South Korea.
Around the world, crypto trading is still a small-scale activity, mostly enjoyed by extremely risk-tolerant individuals, however, it has been very popular in South Korea.
Around the world, crypto trading is still a small-scale activity, mostly enjoyed by extremely risk-tolerant individuals, however, it has been very popular in South Korea.
The volume of trades involving bitcoin and other cryptos on Korean crypto exchanges has surpassed the activity on equities listed on the Kospi stock index, the country's main benchmark.
Koreans are restricted from transferring their funds into foreign currency to trade on international crypto marketplaces.
This is due to currency controls and anti-money laundering regulations.
So, only local exchanges can meet this enormous demand.
This is why South Koreans pay a premium for Bitcoin and other cryptos compared to other countries.
That additional payout is called "The Kimchi premium," named after the popular Korean side dish.
This "Kimchi premium" was the inspiration for the crypto arbitrage trading approach that brought fame and fortune to the now-infamous crypto entrepreneur Sam Bankman-Fried.
However, there is a risk of legal trouble for anyone who tries to profit from the kimchi premium.
Where did the kimchi premium come from?
The phrase appeared during a Bitcoin bull run in 2017 when the cryptocurrency soared past 19,000 dollars, although no one knows who came up with the name first.
However, in today's globalised financial system, prices of the same asset should converge. Investors swiftly capitalise on and trade away any price differential that arises across global markets.
In 2017, crypto fever took off in South Korea, with Bitcoin's increase and a plethora of other coins being offered.
The central bank had to warn its employees not to trade cryptocurrency in 2018, particularly while on the clock. Investors from South Korea remained committed to the asset class despite the market volatility of 2022.
Almost 15 per cent of the population, or 7 million people, are now registered to trade on a crypto exchange. In terms of the volume of crypto transactions, the Korean won surpassed the US Dollar this year.
