Question 1

What is the Kimchi Premium?

Accepted Answer

The Kimchi Premium refers to the phenomenon where crypto prices on Korean exchanges (e.g. Upbit) are higher than on overseas exchanges (e.g. Binance). It is mainly caused by high domestic demand and restrictions on capital outflows.

Question 2

Why does the Kimchi Premium occur?

Accepted Answer

The Kimchi Premium arises from a combination of factors: surging domestic crypto demand, restrictions on KRW remittances abroad, limited access for foreign investors to Korean exchanges, and overheated market sentiment. The premium tends to widen during bull markets.

Question 3

How can I use the Kimchi Premium in investing?

Accepted Answer

The Kimchi Premium serves as an indicator of how overheated the Korean market is. A premium above 5% may signal domestic overheating; a negative premium (discount) may suggest the domestic market is relatively undervalued. Do not rely on this indicator alone for investment decisions.

Question 4

What is a Negative Kimchi Premium (Kimchi Discount)?

Accepted Answer

A negative Kimchi Premium means domestic exchange prices are lower than those on overseas exchanges. This can occur when there is strong selling pressure domestically or when overseas markets are outperforming. A sustained discount may indicate weakened Korean market sentiment.

Question 5

What should I watch out for when trading the Kimchi Premium?

Accepted Answer

Arbitrage using the Kimchi Premium carries risks including overseas remittance regulations, currency risk, trading fees, and price movement during transfer time. There are also legal risks related to illegal currency exchange. Always invest through legal means only.

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