Is The South Korean ‘Kimchi Premium’ Pointing to a Potential Bitcoin Price Peak?
Market indicators are beginning to emerge in the Far East, reminiscent of the last Bitcoin cycle’s peak. The Korean premium, also known as the Kimchi premium, indicates an overheated market, potentially signaling a local Bitcoin top. The Kimchi premium refers to Bitcoin’s higher price on South Korean exchanges compared to US or European markets, creating opportunities for arbitrage trading.
On December 26, crypto analytics firm CryptoQuant observed that the Korean premium’s high values could reflect strong buying pressure from Korean retail investors. However, the index is also used to identify price tops. This is because Koreans have quick access to cash and experience high FOMO (fear of missing out) hype.
Furthermore, the current 14-day moving average for the Korean Premium Index resembles the levels seen during the Bitcoin cycle’s peak in late 2021. Observers are intrigued to see if this index will once again provide crucial insights into potential price tops.
Numerous instances of the Kimchi premium coincided with market crashes in May and November 2022. Therefore, its current presence could indicate a looming correction.
At the time of writing, the price of BTC on Bithumb, South Korea’s leading exchange, is slightly above 58 million KRW, approximately $44,680 in USD. This represents a nearly 3% premium compared to global spot markets, where BTC is currently priced at $43,430.
Bitcoin recently tested resistance just above $44,000 multiple times this month but failed to break through. This stagnant momentum coupled with the overheated Korean Bitcoin market suggests the possibility of a correction. Additionally, the holiday week typically experiences low volatility and limited activity in the crypto markets.
The total market capitalization stands at a 2023 high of $1.75 trillion, with altcoins leading the way. Ethereum remains lackluster at $2,273, while Solana continues its upward trajectory, recording a 7.7% gain and reaching $125 during late trading on December 25.