.png)
.png)
The resurgence of a lucrative yet operationally challenging arbitrage trade has gained traction as bitcoin prices maintain an average 10% premium in South Korea.
Currently, bitcoin is trading above $66,000 on most global exchanges, while commanding over 93 million won on Korean exchanges like Upbit, equivalent to over $71,000. This discrepancy in prices between local Korean exchanges and global platforms is commonly referred to as the "Kimchi premium," named after the popular Korean dish of fermented cabbage.
The arbitrage opportunity seems straightforward: purchase bitcoin on a global exchange, transfer it to a Korean exchange, and sell it for a guaranteed 10% profit in Korean won. However, capitalizing on this opportunity is challenging due to Korea's strict capital controls. Foreigners find it difficult to withdraw significant sums of money from the country, hindering large funds from participating in the trade.
An example of someone who successfully exploited the Kimchi premium is Sam Bankman-Fried, the founder of the now-bankrupt trading firm Alameda Research and FTX exchange. Bankman-Fried revealed in multiple interviews that the premium reached as high as 50% during 2019 and 2020, enabling his firm to generate substantial profits.
Observers suggest that the premium indicates increased retail investor participation and stems from significant local demand for bitcoin. Ki Young Ju, founder of on-chain analysis firm CryptoQuant, described the Kimchi Premium as a "pure retail FOMO indicator," highlighting the resurgence of Korean retail investors.
Bradley Park, head of research at CryptoQuant, noted that traders were likely capitalizing on the arbitrage opportunity. He explained that as the Kimchi premium rises, traders bring their overseas holdings back to Korea, leading to an increase in Bitcoin reserves on platforms like Upbit.
Despite the unchanged bitcoin prices in the past 24 hours, the CoinDesk 20, a comprehensive liquid index, has seen a 5.32% increase.
By fLEXI tEAM
Comments