Kimchi Premium Fades Away, BTC Price Drops In An Instant

The kimchi premium fades away and the BTC price dropped below $58K with the analysts saying the reduction could have had an impact on it so let’s read more in our latest BTC news today.

The Kimchi premium fades away and traders found a way to arbitrage in and out of South Korea with the price of BTC falling to $57,370 which is a 2% drop in the past 24 hours. It is now marginally away from the $60K point that it had had time holding. The premium- which is the highest price that BTC trades in Korea has dropped today while it was caused by the high demand in Korea in combination with the difficulty of trading in and out of the country. Bitcoin’s price reached as high as $70K in the country but it is now below $58K as with the rest of the world. The CEO of CryptoQuant Ki-Young Ju added:

 “It seems someone finally figured out how to arbitrage this Kimchi premium opportunity. The trading volume in [the] 30 min time frame on [Upbit], the largest Korean exchange, was bigger than Binance’s. A drop seems related to Kimchi pullback.”

Arbitrage refers to the trading method which sees trades purchase an asset where it is selling at a lower price and sell it where it is selling at a higher price. in this case, it would entail buying BTC outside of the country and selling it on the Korean market. This technique helps to balance out the supply and demand and to bring the prices closer together on different exchanges. According to the data from CryptoQuant, the premium dropped from 20% to as low as 11% in two hours.

The Kimchi Premium builds up because of the strict capital controls in Korea which are making it very hard to send amounts of the Korean won outside of the country, equaling to low chances of making a profit from the arbitrage opportunity and make the money into dollars. There are also high reporting requirements for taking amounts of money out of the country. However, back in 2018 Sam Bankman Fried used plenty of intermediaries and Banks in Japan to create a way of selling BTC in Korea and get the money out of the country, managing to move up to $25 million per day.