Bitcoin Drops 6% In Korea, Shrinking The ‘Kimchi Premium’

Bitcoin lost ground in Korea as Upbit suspends KRW deposits and withdrawals.

Bitcoin’s Kimchi premium, or the difference between prices on South Korean exchanges and other global avenues, declined on Wednesday as the cryptocurrency lost ground against the Korean won (KRW).

The price gap narrowed to 16% during the European hours, as bitcoin fell by over 6% to KRW 70,412,000 on Upbit exchange – the largest in South Korea as per trading volumes, according to data source CoinGecko.

The price pullback happened after the exchange suspended KRW withdrawal and deposit service at 14:47 local time (5:47 AM UTC).

Bitcoin's price on Upbit

Source:Upbit

"Bitcoin dropped after Upbit announced withdrawal suspension," Ki-Young Ju, CEO of the Korea-based blockchain analytics firm CryptoQuant told CoinDesk in a Telegram chat.

"But there's also the possibility that someone figured out how to arbitrage the Kimchi premium opportunity," Ju added.

The Kimchi premium had swelled to a three-year high of 22% early today in a sign of retail frenzy.

However, executing a classic arbitrage strategy by purchasing bitcoin on western exchanges and dumping on Korean platforms is quite challenging because local exchanges only allow trading in KRW pairs, as discussed on Tuesday.

Some whales have been depositing coins on Korean exchanges, as tweeted by Ju. Investors typically move coins to exchanges when they want to liquidate their holdings.

Analysts say a potential dump in South Korea may not significantly impact bitcoin's global average, as the Asian giant now contributes less than 2% of the worldwide trading volume versus 8% in 2017.

Bitcoin is currently trading near KRW 73,000,000 on Upbit and changing hands at $57,500 on major western exchanges – down 1% on the day, as per CoinDesk 20 data.

Bitcoin's Kimchi premium

Source:CryptoQuant

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