Title: bitcoin’s Record-Breaking Price Soars to $72,504 in South Korea: The Impact of Retail Investors and the Kimchi Premium
The cryptocurrency world has been buzzing with excitement as bitcoin’s (btc) price reached new heights, surpassing $72,504 on South Korea’s leading crypto exchange, Upbit, on March 5th at around 3:00 pm (UTC). This significant spike was accompanied by the reemergence of the infamous “Kimchi Premium,” a term that has gained considerable popularity in the industry since early February.
The Kimchi Premium is a price gap between South Korean exchanges and their global counterparts, driven by the unique dynamics of the South Korean market. According to the Korea Premium Index, which measures this gap, it jumped from 5.19 on February 28th to a solid 6.84 by March 5th, as reported by CryptoQuant.
This sudden surge in price can be attributed to various factors, primarily the growing institutional demand in the United States driving bitcoin’s price northward. Analysts, such as Ho Chan Chung from CryptoQuant, have highlighted that while U.S. investors are actively investing in bitcoin Exchange-Traded Funds (ETFs), South Korea’s price surge is mainly driven by retail investors due to the absence of spot bitcoin ETFs in the country.
Looking back to 2016, when the Kimchi Premium was first identified, it has consistently highlighted regional disparities in bitcoin pricing. During the 2017 bull run, South Korean exchanges traded bitcoin at nearly 50% higher than their global counterparts. Fast forward to 2021, and the premium peaked at 21.56% in May.
Arbitrage traders have been quick to exploit these price differentials, but the persisting premium also highlights underlying market inefficiencies, particularly during uptrends. South Korea’s financial regulators are now considering introducing spot bitcoin ETFs to potentially harmonize price disparities. The Financial Supervisory Service (FSS) Governor, Lee Bok-hyun, has hinted at ongoing discussions, although the nation remains cautious due to the volatile nature of cryptocurrencies.
As of now, bitcoin is trading approximately 93,800,000 KRW ($70,000) on Upbit, while the global markets hover around $65,000. bitcoin’s market cap also reached a historic $1.35 trillion on March 5th, placing it among the top 8 largest assets worldwide, overtaking silver. This remarkable achievement came shortly after bitcoin recorded its highest daily close of $69,245 on March 4th, surpassing its previous record set in November 2021.
Analysts are optimistic about bitcoin’s future, with some predicting that it could hit the $100,000 mark before 2024. This confidence stems from the recent approval of spot bitcoin ETFs in the U.S., which has injected a renewed sense of optimism into the market. February saw bitcoin surge by an impressive 44%, underscoring growing investor confidence and institutional buy-in.
The bitcoin futures market has also witnessed a surge in open interest, reflecting strong investor conviction in the ongoing rally. With figures surpassing previous highs of November 2021, the market’s buoyancy is evident. Additionally, MicroStrategy’s announcement to raise $600 million to purchase more bitcoin underscores the corporate world’s growing interest in digital currencies.
