'Cheaper bitcoin in Korea?' Reverse kimchi premium persists as domestic crypto enthusiasm cools [Crypto360]

The "reverse kimchi premium" — a phenomenon in which digital asset prices in South Korea trade below overseas levels — has become an entrenched feature of the domestic market this year. As local investors' enthusiasm for digital assets has cooled from prior years, the "kimchi premium" that once signaled an overheated Korean market has flipped into its opposite.

According to on-chain data platform CryptoQuant, bitcoin's kimchi premium indicator was negative every day from Aug. 1 through Sunday, averaging -0.48 over the period — meaning bitcoin traded on domestic exchanges at an average 0.48 percent discount to overseas platforms.

The kimchi premium indicator measures the percentage price difference between digital assets on South Korea's five major won-denominated exchanges and their overseas counterparts. A positive reading means domestic prices are higher than overseas; a negative reading means they are lower.

Ether showed a similar pattern. The kimchi premium indicator for ether did not turn positive on a single day from the start of this month through Sunday, averaging -0.49 over the period.

Particularly notable this year is that the reverse kimchi premium has appeared both more frequently and for longer stretches than in the past. From the start of this year through Sunday, bitcoin traded at a discount to overseas prices on 123 of 221 days — well over half the year. It marks the first time since CryptoQuant began providing the data in July 2020 that the reverse kimchi premium has outnumbered the kimchi premium on an annual basis.

The streak record has also been rewritten. Bitcoin traded at a domestic discount for 35 consecutive days from June 20 through July 24, surpassing the previous record of 23 days set last year. That record had already been broken twice this year — first at 30 days, then extended to 35.

The kimchi premium typically widens when domestic investment demand outpaces overseas demand. Heavy buying by local investors pushes won-denominated exchange prices above global levels for the same digital assets.

Recently, however, the dynamic has reversed. Analysts point to a combination of factors: a rally in the domestic stock market has drawn investment funds toward equities, while the digital asset market itself has slumped. Restrictions on the launch of new investment products — including derivatives — in South Korea are also cited as a factor limiting fresh capital inflows.

"The limited availability of virtual asset-based derivatives in Korea has restricted new inflows," said Park Seong-je, a researcher at Shinhan Investment. "With digital asset taxation also on the horizon, the investment appeal is not particularly high."