Bitcoin (BTC) price briefly reached a record high of 96,734,000 South Korean Won, equivalent to $72,504, on March 5, 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 Feb. 28 to 6.84 on March 5.
This coincided with Bitcoin price hitting a new all-time high above $69,200 on March 5, driven by continued inflows into United States’ Bitcoin ETFs. The rally in Bitcoin price is primarily fueled by institutional demand in the United States, according to Ho Chan Chung, an analyst at CryptoQuant. However, in South Korea, retail spot buying is the main driver of the rising Bitcoin price as the country has no spot Bitcoin ETFs.
The Kimchi premium first emerged in 2016 and gained attention in a 2019 paper from the University of Calgary. The researchers found that between January 2016 and February 2018, South Korean Bitcoin exchanges consistently had prices around 4.73% higher than exchanges in the United States. During the bull run in December 2017, South Korean exchanges were trading Bitcoin at nearly 50% higher prices than most exchanges worldwide, leading CoinMarketCap to remove some Korean exchanges due to the extreme price divergence.
During the 2021 bull run, the Kimchi premium reached its peak at 21.56% on May 19 when Bitcoin was trading above $36,000 before reaching its previous all-time high in November 2021.
Some traders are attempting to profit from these price differences through arbitrage. However, the premium primarily exists due to market inefficiencies, especially during strong uptrends.
Meanwhile, South Korea’s financial watchdog is reportedly considering allowing spot Bitcoin ETFs in the country, which could potentially eliminate the price difference if approved. The governor of the Financial Supervisory Service, Lee Bok-hyun, stated that he is positive about virtual assets, but they need to hear the opinions of other authorities as well.
At the time of writing, the Korea Premium Index remains intact with Bitcoin trading at around 93,800,000 KRW ($70,000) on Upbit, while the BTC price elsewhere hovers around $67,000.
Please note that this article does not provide investment advice or recommendations, and readers should conduct their own research before making any decisions.