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Kimchi Reward Crashes After Bitcoin Traded Above $ 70,000 In South Korea

Bitcoin’s price skyrocketed to over $ 70,000, but only in South Korea when the so-called “kimchi premium” hit an annual high of over 20%. However, it has fallen significantly in the last few hours, which, according to historical data, could lead to a retracement for BTC.

Kimchi Premium annual high

Named after a traditional South Korean side dish, “Kimchi Premium” represents the price difference of BTC on local exchanges and around the world. While it might sound logical that Bitcoin should trade at the same or similar price in every country, it is rarely the case with South Korea as it is a global asset.

CryptoQuant data shows a gap between trading venues in the East Asian country and other exchanges. As the graphic below shows, the prices vary regularly.

Bitcoin Korea Premium Index. Source: CryptoQuant

The premium has escalated further in the last few days and reached an annual high of over 20% yesterday. The reasons for this discrepancy are complex. Moskovski Capital CEO Lex Moskovski noted that local regulations allow users to sell BTC for the Korean won only, but not withdraw it in USD. This offers “no arbitrage opportunities to push the price down”.

Bitcoin Kimchi Premium annual high.  Source: CryptoQuantBitcoin Kimchi Premium annual high. Source: CryptoQuant

But the story could be more than that. The price of BTC soared to over $ 70,000 on the South Korean exchange, Upbit, owned and operated by Dunamu. The latter is to go public on the New York Stock Exchange (NYSE).

This speculation has increased demand for the company and all other related projects. Aside from Upbit’s growing popularity in South Korea, companies that own Dunamu such as Kakao, Woori Capital and Hanhwa Investments have increased their respective stakes by up to 8% in just a few days.

Declines in premiums; History points to a drop in prices

A recent graphic from CryptoQuant highlighted the “significant” drop in the kimchi premium. Bitcoin price on South Korean exchanges and other trading venues has closed the massive gap and is around $ 58,000 everywhere.

BTC Korea Premium Index is falling.  Source: CryptoQuantBTC Korea Premium Index is falling. Source: CryptoQuant

However, history shows a possible drop in the price of the primary cryptocurrency. Arcane Research analyst Vetle Lunde posted an infographic indicating that the price of BTC has gone down in most cases after a peak in the kimchi premium.

For example, market corrections occurred after two of the highest highs – 63% in May 2017 and 47% in January 2018.

Considering that the premium has dropped sharply in the last few hours, it can be assumed that it has already peaked. Nevertheless, the South Korean market is no longer as big as it was in 2017/2018 and the impact on prices could be significantly less.

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