Bitcoin is currently experiencing a discount on South Korean exchanges, marking a departure from the usual “kimchi premium” that signifies a bullish market sentiment. According to The Korea Times, the cryptocurrency is trading at approximately 700,000 won ($511.73) lower locally compared to global exchanges, resulting in a negative premium of -0.74% as of Thursday afternoon.
This shift in pricing suggests a bearish outlook among South Korean investors. Typically, a higher kimchi premium indicates strong local demand and positive sentiment, leading to Bitcoin prices exceeding global rates. On the other hand, a lower or negative premium indicates weakened enthusiasm and decreased buying pressure, potentially signaling a market correction or alignment with global valuations.
Analysts attribute this discrepancy to subdued investor sentiment in South Korea and higher demand for virtual assets on foreign platforms. Restrictions prevent foreign and institutional investors from accessing domestic exchanges, amplifying the impact of declining retail investor demand, as noted by KP Jang, head of Xangle Research.
Moreover, a shift in trader preferences towards altcoins is also influencing the market dynamics. As Bitcoin surged globally, Korean traders started accumulating undervalued alternative cryptocurrencies in anticipation of a strong fourth-quarter rally. These altcoins, including Tao, Sei Network, Aptos, Sui, NEAR Protocol, and The Graph, are perceived to offer higher returns, diverting attention away from Bitcoin.
Declan Kim, a research analyst at DeSpread, highlighted that the altcoin market, which constitutes a significant portion of domestic trading, is facing challenges amid transitional phases of new regulations. The implementation of the Virtual Asset User Protection Act is impacting market forces, with many altcoins remaining unlisted on domestic exchanges compared to foreign ones.
The kimchi premium has historically been a defining feature of South Korea’s crypto market. When Bitcoin surpassed the 100 million won mark domestically in March, the premium briefly spiked to as much as 10%, signaling strong local demand and bullish sentiment. However, the current negative premium indicates bearish sentiment and decreased buying pressure.
There has been a notable decline in Bitcoin-Korean won (BTC/KRW) trading volume over the past 40 days, reflecting a shift in investor focus. Analysts believe that the reverse kimchi premium is likely temporary and expect the price gap between domestic and foreign markets to narrow in the future.
Overall, the current trading conditions in South Korea’s crypto market reflect a complex interplay of domestic regulations, investor behaviors, and global market trends. While the negative kimchi premium may seem unusual, it could ultimately lead to a more balanced and mature market as it aligns more closely with global digital asset valuations.
It is worth noting that the last time the Kimchi Premium fell negative was in Oct. 2023, just before Bitcoin’s ETF-fueled bull run. This historical context underscores the dynamic nature of the cryptocurrency market and the potential for rapid shifts in market sentiment.