Bitcoin (BTC) ‘kimchi premium’ has returned to South Korea’s cryptocurrency market as the country faces political instability. This has led to a weakening of the Korean won (KRW) and a higher value of the leading cryptocurrency.
Bitcoin Kimchi Premium Surges in South Korea
According to CryptoQuant CEO Ki Young Ju, the KRW-USD trading pair has reached a 15-year low, reflecting the declining confidence of South Koreans in their fiat currency. Depreciation won carried on South Koreans will invest in emerging assets like Bitcoin to protect the purchasing power of their KRW during times of economic uncertainty.
In a posted on X, Ju explained that South Korean crypto traders are increasingly converting KRW into cryptocurrencies such as Bitcoin and the USD-pegged stablecoin USDT on the Upbit exchange, where BTC trades at a premium of -3-5%. This price difference, often referred to as Bitcoin’s ‘kimchi premium’, occurs when BTC trades at a higher rate on the South Korean exchange compared to global platforms.
Usually, the so-called premium kimchi comes from high demand for spacegrowing regulatory barriers, and limited arbitrage opportunities in the South Korean cryptocurrency market. However, in this case the premium is mainly driven by the weak KRW due to the growing political unrest in the country.
At the time of writing, Bitcoin is trading in South Korea at 145,000,000 KRW or about $98,600, while on global exchanges like Binance, BTC is trading at $95,315. The difference between these platforms highlights the impact of the kimchi premium.
What Causes the KRW to Fall?
The decline of the South Korean won may be due to the ongoing political unrest, which has been intensifying since December 3. On this day, the current former president, Yoon Suk Yeol, declared martial law for six hours before reversing the decision. After this, the South Korean parliament expelled Han Duck-soo, the country’s prime minister and acting president.
The dramatic events sent shockwaves through global markets, dented confidence in South Korea’s democratic institutions and raised fears of a country facing its worst political crisis in decades. The monthly chart below shows how the KRW has fallen from its lowest value against the USD since March 2009.
In another post on X, Jeff Park, head of alpha strategies at investment manager Bitwise, emphasized that South Korea’s political turmoil is centered on allegations of electoral fraud and the loss of trust in the National Election Commission (NEC). Park commented:
The use of impeachment as a political tool, combined with allegations of foreign election interference, underscores the fragility of democracy in the face of disrespect for information. This is not just a Korean story; it is a warning to democracies around the world.
Political unrest in South Korea has sent its cryptocurrency market to a crazyresulting in record-breaking trading volumes. At press time, BTC is trading at $95,315, down 0.2% in the last 24 hours.
Featured image from Unsplash.com, Charts from X and TradingView.com
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