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Kimchi Premium

TradingKeyTradingKey19 hours ago

The "kimchi premium" refers to the additional price margin over global bitcoin prices that is observed on South Korean cryptocurrency exchanges. It indicates how much more South Koreans are willing to pay for bitcoin.

The difference in bitcoin prices between South Korean exchanges and those outside of Korea is known as the "kimchi premium." This term is derived from kimchi, a well-known Korean pickled side dish.

According to researchers at the University of Calgary, the "kimchi premium" first emerged in early 2016. Their study suggests that bitcoin prices tend to drop during Asia's trading hours because traders are selling bitcoin at elevated prices on South Korean exchanges.

The mechanism behind this is that cryptocurrency traders buy large quantities of bitcoin from markets outside Korea, where prices are lower, and then sell them back in Korea to realize a profit. This practice is known as "arbitrage trading."

At the beginning of 2017, there was little to no significant price difference for bitcoin between South Korea and the rest of the world. However, by early 2018, the "kimchi premium" had surged to over 50%. The peak of this spread was recorded at 54.48% in January 2018.

Disclaimer: The content of this article solely represents the author's personal opinions and does not reflect the official stance of Tradingkey. It should not be considered as investment advice. The article is intended for reference purposes only, and readers should not base any investment decisions solely on its content. Tradingkey bears no responsibility for any trading outcomes resulting from reliance on this article. Furthermore, Tradingkey cannot guarantee the accuracy of the article's content. Before making any investment decisions, it is advisable to consult an independent financial advisor to fully understand the associated risks.

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Kathy Lien is a specialist in global currencies, an author, and the Managing Director of BK Asset Management.

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