Emily Walker
The Bitcoin (BTC) ‘kimchi premium’ has resurfaced in South Korea’s cryptocurrency market amidst ongoing political turbulence, leading to a decline in the Korean won (KRW) and an increase in Bitcoin prices.
Surge of Bitcoin Kimchi Premium in South Korea
Ki Young Ju, CEO of CryptoQuant, has indicated that the KRW-USD exchange rate has hit a 15-year low, showcasing a lack of trust among South Koreans toward their currency. As the won depreciates, many South Koreans are turning to assets like Bitcoin to protect their purchasing power during uncertain economic conditions.
In a recent post on X, Ju noted that South Korean traders are converting KRW into cryptocurrencies like Bitcoin and the USD-pegged stablecoin USDT on the Upbit exchange, where Bitcoin currently trades at a premium of 3-5%. This phenomenon, known as the ‘kimchi premium,’ occurs when Bitcoin sells for a higher price on South Korean exchanges compared to international ones.
This price disparity typically arises from strong local demand, strict regulations, and limited opportunities for price adjustments in South Korea’s crypto markets. However, the current premium is chiefly due to the declining value of the KRW amid rising political unrest.
At present, Bitcoin is priced at 145,000,000 KRW, approximately $98,600, compared to $95,315 on exchanges like Binance. This significant difference illustrates the extent of the kimchi premium.
Reasons Behind the KRW’s Drop
The decline of the South Korean won is largely linked to ongoing political instability that escalated on December 3, when the former president Yoon Suk Yeol controversially declared a brief martial law before retracting it. This turmoil culminated in the impeachment of Han Duck-soo, the acting president and prime minister.
These dramatic political shifts have rattled global markets, eroding confidence in South Korea’s democratic frameworks and raising concerns about potential deepening political crises in the nation. A monthly chart indicates that the KRW has fallen to its lowest value against the USD since March 2009.
In a distinct post on X, Jeff Park, head of alpha strategies at Bitwise, pointed out that the ongoing political unrest stems from allegations of electoral misconduct and diminishing trust in the National Election Commission (NEC). Park mentioned:
The use of impeachment as a political tactic, coupled with accusations of foreign election meddling, highlights the vulnerability of democracy amid misinformation. This issue is not confined to Korea; it serves as a cautionary tale for democracies globally.
The political turmoil has also triggered a surge in activity within South Korea’s cryptocurrency market, resulting in record trading volumes. Currently, Bitcoin is trading at $95,315, reflecting a slight decrease of 0.2% over the past 24 hours.
