South Korea’s Bitcoin Kimchi premium rises to a 2-year high. Is this bad news for BTC?

South Korea's Bitcoin Kimchi premium has risen to last year's 2021 levels, while the recent Bitcoin rally led to a new all-time high.

Data from CryptoQuant shows that the premium index hit a 27-month high of 10.32% on March 6, indicating increasing demand and interest in BTC from local investors in the South Korean crypto market.

Kimchi Premium reaches 10.32%

The Kimchi Premium, also the name of a traditional South Korean supplement, is an index that shows the difference in the valuation of Bitcoin on local and global crypto exchanges. Since South Korea is one of the largest players in the digital asset market, the index is an important indicator for monitoring changes in the crypto landscape.

Typically, cryptocurrency prices on South Korean exchanges differ from those on foreign platforms, mainly due to strict capital control policies from regulators. Foreign investors, including institutional firms, are banned from trading on South Korean exchanges and local traders are penalized if they engage in arbitrage. The limited supply of cryptocurrencies in the country usually leads to large price differences due to strong demand.

A high premium indicates bullish sentiment on local exchanges compared to international platforms, while a lower value indicates bearish sentiment and easing buying pressure.

The premium is also considered an indicator of retail fear of missing out (FOMO). This is evident as the price of BTC rose to over 97 million won ($72,926) on the Upbit exchange as the crypto asset briefly hit its all-time high of $69,000 in the US on Tuesday.

A possible price correction

It is worth noting that BTC could see a price correction following an eventual decline in the Kimchi premium. Historical data shows that in most cases the price of Bitcoin has collapsed after a peak in the index. However, it remains to be seen when such an incident would occur.

Meanwhile, premiums are rising as the South Korean government reassesses its stance on Bitcoin exchange-traded funds (ETFs). Early last month, Financial Supervisory Service chief Lee Bok-Hyun announced a visit to the U.S. Securities and Exchange Commission later this year to discuss Korean discount measures such as spot Bitcoin with SEC Chairman Gary Gensler. Discuss ETFs. Discussions about the products were also the focus of the country's election campaign.

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