The price of Bitcoin (BTC) continues to be between $56,000 and $60,000 as the so-called “kimchi premium” is soaring to annual highs.
When the Bitcoin transaction price in South Korea is higher than other major markets such as the United States, a premium for kimchi will be formed.
In 2017, the premium of kimchi exceeded 20%, resulting in Bitcoin transaction prices in South Korea at approximately US$24,000, while in the US it was as high as nearly US$20,000.
Last week, on March 29, the premium reappeared, hovering at 6%, and has since climbed to around 1
The premium for kimchi is 11%. Is this bad for Bitcoin?
When the premium of Korean kimchi rose to a record high for the last time, the Bitcoin market almost peaked and a sharp correction immediately occurred.
Although the premium indicates that the South Korean cryptocurrency market is showing signs of overheating, its high is not high enough to reach its peak.
Ki Young Ju, CEO of CryptoQuant, said that the premium is worrying, but the fundamentals of Bitcoin look strong.
However, the difference between this time and 2017 is that South Korea only accounts for 1.7% of the global Bitcoin market transaction volume.
Therefore, Ki explained that even if the Korean market pulls back due to rising premiums, it will not have as much impact as it did in 2017. He pointed out:
“The $BTC fundamentals still look good, but the South Korean bubble worries me. The price of Shitcoins has skyrocketed, and South Korean cryptocurrency trading volume has surpassed the National Stock Exchange (KOSPI). Even if the bubble bursts, the impact will be small. Because it is only 1.7%”
More importantly, unlike 2017, the continued Bitcoin rally is dominated by institutions and high-net-worth investors, as evidenced by the massive outflow of funds from Coinbase.
However, one of the reasons why many analysts worry that the Korean cryptocurrency exchange market is overcrowded is that people have a strong interest in emerging crypto assets.
For example, the most traded cryptocurrencies on Bithumb, rather than Bitcoin and Ether (ETH), are usually new types of altcoins that have been around for several months.
High net worth investors are continuing to buy
Less than a week ago, on March 29, Ki emphasized that shorting Bitcoin was not an ideal transaction because Coinbase Pro saw a large outflow of funds.
Outflows from top exchanges usually indicate that institutional investors are buying Bitcoin and transferring their holdings to self-custodial wallets.
Ki said at the time:
“It doesn’t seem to be a good idea to short BTC right now. Since institutions may have bought BTC at this level, it is unlikely that it will fall below $52,000.”
Since then, Bitcoin has risen by about 5%, and there has been a relatively stable upward trend, which may be due to new signs of weakness in the U.S. dollar.