Political Instability in South Korea Drives Bitcoin ‘Kimchi Premium’ Surge
The Bitcoin ‘kimchi premium’ has made a comeback in South Korea’s cryptocurrency market as the country faces political turmoil. This has resulted in a weakened Korean won (KRW) and a higher price for the leading cryptocurrency, Bitcoin.
According to CryptoQuant CEO Ki Young Ju, the KRW-USD trading pair has hit a 15-year low, indicating a decrease in confidence among South Koreans in their fiat currency. The depreciating won has prompted South Koreans to turn to alternative assets like Bitcoin to protect the value of their KRW during times of economic uncertainty.
Ju explained in a post on X that South Korean crypto traders are increasingly converting KRW into cryptocurrencies such as Bitcoin and the USD-pegged stablecoin USDT on the Upbit exchange. On Upbit, BTC is trading at a premium of 3-5%, a phenomenon known as the Bitcoin ‘kimchi premium.’ This premium typically arises due to high local demand, regulatory barriers, and limited arbitrage opportunities in South Korea’s cryptocurrency market. However, in this case, the premium is primarily driven by the weakening KRW amid escalating political instability.
At present, Bitcoin is trading in South Korea for 145,000,000 KRW or approximately $98,600, while on global exchanges like Binance, BTC is priced at $95,315. This price difference underscores the impact of the kimchi premium.
The decline of the KRW can be attributed to ongoing political unrest in South Korea, which has intensified since December 3. On that day, the now-impeached former president Yoon Suk Yeol declared martial law for six hours before retracting the decision. Subsequently, South Korea’s parliament impeached Han Duck-soo, the country’s prime minister and acting president. These events have rattled global markets, eroding confidence in South Korea’s democratic institutions and sparking concerns about the country facing its most severe political crisis in decades.
The monthly chart shows how the KRW has plummeted to its lowest value against the USD since March 2009. Jeff Park, head of alpha strategies at investment manager Bitwise, highlighted in a separate post on X that South Korea’s political turmoil revolves around allegations of election fraud and a loss of trust in the National Election Commission (NEC).
Park remarked, “The use of impeachment as a political tool, coupled with allegations of foreign election interference, underscores the fragility of democracy in the face of disinformation. This is not just a Korean story; it’s a warning for democracies worldwide.”
The political unrest in South Korea has triggered a frenzy in its cryptocurrency market, leading to record-breaking trading volumes. Currently, BTC is trading at $95,315, down 0.2% in the past 24 hours.
As South Korea grapples with political instability, the resurgence of the Bitcoin ‘kimchi premium’ serves as a stark reminder of the impact of geopolitical events on the cryptocurrency market. Investors and traders are closely monitoring the situation in South Korea as it continues to unfold.