Kimchi Premium Key Points
- Kimchi Premium refers to the price difference in cryptocurrencies, specifically Bitcoin, observed between South Korean exchanges and foreign exchanges.
- It is an economic phenomenon that occurs due to the capital controls in South Korea.
- Kimchi Premium is named after a traditional South Korean dish and is indicative of South Korea’s significant impact on the global cryptocurrency market.
- The premium can drastically affect the price of Bitcoin and other cryptocurrencies, leading to arbitrage opportunities.
Kimchi Premium Definition
The Kimchi Premium is the gap in cryptocurrency price, particularly Bitcoin, between South Korean crypto exchanges and foreign exchanges. This price discrepancy is often due to the capital controls in place in South Korea, which limit the movement of assets out of the country.
What is Kimchi Premium
Kimchi Premium is a phenomenon in the cryptocurrency market where the price of a cryptocurrency such as Bitcoin is higher on South Korean exchanges compared to foreign exchanges.
The name ‘Kimchi Premium’ is derived from a traditional fermented South Korean dish, Kimchi, and represents the extra price South Korean investors pay for Bitcoin and other cryptocurrencies.
Who is Affected by Kimchi Premium
Primarily, South Korean investors and traders are affected by the Kimchi Premium as they have to pay a higher price for cryptocurrencies compared to their counterparts in other countries.
However, it also affects foreign investors who might see it as an arbitrage opportunity but are unable to take advantage due to South Korea’s strict capital controls.
When Does Kimchi Premium Occur
Kimchi Premium typically occurs when there is a surge in demand for cryptocurrencies in South Korea.
It is more noticeable during bullish market conditions when the demand for cryptocurrencies is high, leading to increased prices on South Korean exchanges.
Where is Kimchi Premium Observed
The Kimchi Premium is observed in the cryptocurrency market, specifically on South Korean exchanges.
It is calculated by comparing the prices of cryptocurrencies on South Korean exchanges with those on foreign exchanges.
Why Does Kimchi Premium Happen
Kimchi Premium happens due to the capital controls in place in South Korea that restrict the movement of assets out of the country.
These controls create a supply and demand imbalance, where the demand for cryptocurrencies in South Korea exceeds the supply, leading to higher prices.
How is Kimchi Premium Calculated
Kimchi Premium is calculated by taking the price of a cryptocurrency on a South Korean exchange, subtracting the price on a foreign exchange, and then dividing this by the price on the foreign exchange.
The result is then multiplied by 100 to give the Kimchi Premium as a percentage.
