Key Takeaways
- Kimchi premium refers to the difference in crypto prices between South Korean crypto exchanges and the international market.
- The Bitcoin Kimchi Premium just rose to a three-year high as prices in the international crypto markets dipped following Trump’s announcement of plans to introduce a new trade tariff.
- Experts suggest the dip was caused by selling pressure and the Dollar Index (DXY) fluctuation.
On a day when the international crypto markets experienced a severe bloodbath, liquidating over $400 billion, South Korea’s Bitcoin Kimchi premium surged to a new three-year high.
According to CryptoQuant data, the Bitcoin Kimchi Premium surged 12% as the flagship cryptocurrency’s price declined sharply to a low of $92,000. The premium represents the gap between the cost of assets on local exchanges and the global market, considering that traders in South Korea pay higher for their Bitcoin than the international market charges.
Bitcoin Kimchi Premium
Historically, the Kimchi Premium appears whenever there’s a strong demand for a particular crypto asset in the South Korean market. However, its persistence mostly signals a profound structural constraint. In the current situation, the premium highlights bullish signs that may not necessarily be driven by local traders rushing to take advantage of reduced BTC prices.
Commenting on the development, CryptoQuant CEO Ki Young Ju suggests that the reason may not be Korean traders buying the dip but converting their BTC holdings to the US dollar rather than the Korean Won. He emphasized that few Koreans could be cashing out their Bitcoin for the local currency, similar to what is happening internationally.
A Sign of Uncertainty
As Bitcoin’s value dropped, several local traders decided to convert their crypto to USD, causing the premium spike. Economists believe the shift was a response to the broader global economic pressures. As the selling trend was made worse by the fluctuation in the Dollar Index (DXY), it pushed more local traders into converting their crypto to what they considered a more stable currency. In this case, the Bitcoin Kimchi Premium may not truly represent bullish behavior but a sign of uncertainty.
Experts believe the crypto market dip was caused by US President Donald Trump’s announcement on February 1 that his government would enact 25% tariffs on imports from Canada and Mexico and a 10% tax on imports from China. The announcement led to a severe market decline, sending stocks in various markets to record negative figures. Describing the experience, Asian Stock market analyst Daniel Yan linked the selloff to increased vulnerability to US protectionist policies and how it affected global markets.
Conclusion
Despite the current cryptocurrency market dip, experts are optimistic about the market’s potential to recover, especially following the talks between Donald Trump and the Presidents of Mexico and Canada to review the trade tariffs. The movement of funds from Bitcoin to the local Korean currency could have spiked the latest Bitcoin Kimchi premium as traders potentially looked to hedge against further geopolitical instability.
