What Is the "Kimchi Premium"?
Why It Exists and Why It Fades
Crypto prices on Korean exchanges like Upbit often trade above global exchanges like Binance. Behind "Koreans pay more" is a structural cause, not irrationality. This article doesn't cover how to arbitrage it.
Definition — the Same Coin, a Different Price
The same Bitcoin can trade at different prices on Upbit (a KRW market) versus Binance (a USD market) once you convert both to the same currency. When the domestic price is higher, that's the kimchi premium. When it's lower, that's a reverse premium.
Why It Doesn't Disappear — Arbitrage Is Blocked
In theory, a price gap between two markets should trigger arbitrage — buying where it's cheap and selling where it's expensive — until prices converge. But Korea's Foreign Exchange Transactions Act requires reporting and imposes limits on cross-border movement of won and foreign currency, and moving funds quickly between exchanges in different countries is also practically difficult. This friction is the core reason the price gap persists instead of closing.
What Widens the Premium
- A surge in domestic demand — tends to widen during bull markets when Korean retail buying concentrates
- Remittance and FX regulation — the friction cost of moving funds itself
- Liquidity differences between exchanges — thinner domestic liquidity makes prices more sensitive to flow
How Large Has It Gotten Historically?
During the extreme bull market of late 2017, the premium is widely reported to have exceeded 50% at its peak. As the market matured, the typical premium has generally narrowed, but it can widen again sharply during periods when domestic demand spikes.
What the Premium Means as an Indicator
The size and direction of the premium is sometimes read as a thermometer for domestic investment sentiment. A rapidly widening premium is often interpreted as a sign of overheating domestic speculative demand; a rapid narrowing or reversal is often read as rising domestic selling pressure or fear. That said, this interpretation itself hasn't been verified to have predictive power, so it's safest to treat it as reference information only.