Study Reveals South Korea’s ‘Kimchi Bounty’ Is Strongly Linked to International Remittances to China – Bitcoin News

A newly published study published in December 2022 shows that South Korea’s “kimchi premium,” the divergence in cryptocurrency valuations on Korean exchanges compared to Western trading platforms, is strongly linked to a surge in international remittances to China.

Research into overseas remittances to China reveals strong correlation with South Korea’s “kimchi bounty.”

According to a study conducted by Jangyoun Lee, an assistant professor at Incheon National University, and Taehee Oh of the Bank of Korea, South Korea’s kimchi bounty appears to be significantly correlated with an influx of foreign remittances to China. The researchers note that the first instance of the kimchi bounty in South Korea occurred in 2016, when Korean investors experienced high demand for Bitcoin but limited supply of BTC. Essentially, the kimchi premium refers to the fact that the price of bitcoin and other cryptocurrency assets is significantly higher in South Korea than on western exchanges.

The researchers explained that between January 2016 and May 2021, the team analyzed financial data on foreign remittances to China from about 1,211 foreign exchange transactions. Prior to January 2018, during the Bitcoin bull run of 2017, researchers stated that the premium peaked at nearly 55% before waning. However, the kimchi premium reappeared in the first quarter of 2021, and the study authors noted that as of May 19, 2021, the premium was more than 20% higher than the price on western cryptocurrency trading platforms. The authors of the research paper add:

Our results suggest that when the kimchi premium has been persistently high, Chinese arbitrageurs use Korean financial institutions as Bitcoin depositories and convert virtual currencies into fiat currencies.

The authors of the study believe that a significant part of the premium and increase in foreign arbitrageurs is related to events in China. For example, the paper describes that while China banned cryptocurrencies, South Korea and countries like the US decided to regulate the industry. “Hence, Chinese arbitrageurs could only withdraw their cryptocurrencies outside the country,” according to the producers of the research paper kimchi premium.

“This paper shows that the kimchi premium is positively related to the increase in remittances to China after controlling the key drivers that directly affect it, such as stocks, bonds, foreign exchange and the real economy,” the paper’s authors claim . The authors further believe that the results illustrate the complexity of the global cryptocurrency market and that international standards and common regulations are needed to protect investors. South Korea has been a “target for cryptocurrency arbitrage traders who are taking advantage of excess demand,” the paper notes.

South Korean bitcoin rewards in 2023

The kimchi premium continues to this day, and as of 9:00 p.m. Eastern Time on January 9, 2023, the price of Bitcoin (BTC) on Upbit and Bithumb, two of South Korea’s top cryptocurrency exchanges, was around $17,427 to $17,437 each Unit . However, at the exact same time, using the global average on coinmarketcap.com, the price of BTC on Western exchanges was $17,205 per coin. This means that arbitrage traders trading BTC can earn a premium of around 1.35% on South Korean exchanges, and there is also a difference between Ethereum (ETH) prices on Western exchanges compared to its value on South Korean ones exchanges.

Large premiums for BTC have also regularly appeared on the Japanese cryptocurrency exchange market. Bounties on bitcoin have also been observed in countries like Thailand, Hong Kong, Brazil, Malaysia, the Philippines and Chile. In addition, arbitrage opportunities were readily available before in-person trading was banned on the Localbitcoins trading platform. While the trend has declined by country and bitcoin liquidity in the region, foreign arbitrageurs can still benefit from exchanging funds between two locations.

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What do you think of the study on South Korean kimchi premiums and the results suggesting it’s linked to Chinese remittances? Let us know what you think about this topic in the comment section below.

Jamie Redman

Jamie Redman is the news director at Bitcoin.com News and a Florida-based financial technology journalist. Redman has been an active member of the cryptocurrency community since 2011. He has a passion for bitcoin, open source code and decentralized applications. Since September 2015, Redman has written more than 6,000 articles for Bitcoin.com News about today’s emerging disruptive protocols.

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