In a surprising turn of events, the phenomenon known as the “Kimchi premium” has resurfaced in South Korea, signaling a unique arbitrage opportunity for Bitcoin BTC/USD traders.
What Happened: The “Kimchi premium,” a term that denotes the higher price of Bitcoin in South Korea compared to global markets, is attracting attention once more, as reported by CoinDesk on Thursday. Currently, Bitcoin’s price is approximately 10% higher on South Korean exchanges like Upbit than on international platforms.
This arbitrage strategy, though potentially lucrative, is fraught with challenges due to South Korea’s strict financial regulations and the difficulty of moving large sums of money out of the country.
Sam Bankman-Fried, the founder of Alameda Research and the now-defunct FTX exchange, famously exploited this premium, reportedly earning up to a million dollars daily in 2019 and 2020, as per CNBC.
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The resurgence of the Kimchi premium is attributed to high local demand and the active participation of retail investors. CryptoQuant’s founder, Ki Young Ju, and head of research, Bradley Park, both highlighted the premium’s return as an indicator of retail investor FOMO and increased Bitcoin movements to Korean exchanges.
Why It Matters: The return of the Kimchi premium occurs amid a backdrop of significant milestones for Bitcoin, including reaching new all-time highs past the $69,000 mark. This surge in Bitcoin’s value has been partly attributed to the approval of Bitcoin ETFs in early 2024, sparking optimism within the cryptocurrency sector.
Additionally, the South Korean cryptocurrency market has been notably active, with tokens such as Solar (SXP) and Icon (ICX) experiencing dramatic gains and trading volumes, further illustrating the vibrant crypto trading environment in the country. This frenzy was particularly evident on Upbit, where trading volumes for these tokens surpassed those of Bitcoin and Ether.
Image: Pete Linforth from Pixabay
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