Bitcoin’s “kimchi premium,” or the difference between prices on South Korean exchanges and other global avenues, declined on Wednesday as the cryptocurrency lost ground against the Korean won (KRW).
- The price gap narrowed to 16% during the European hours, as bitcoin fell by over 6% to KRW 70,412,000 on the Upbit exchange, the largest in South Korea as per trading volumes, according to data source CoinGecko.
- The price pullback happened after the exchange suspended KRW withdrawal and deposit service at 14:47 local time (5:47 a.m. UTC).
- "Bitcoin dropped after Upbit announced withdrawal suspension," Ki Young Ju, CEO of the Korea-based blockchain analytics firm CryptoQuant, told CoinDesk in a Telegram chat.
- "But there's also the possibility that someone figured out how to arbitrage the Kimchi premium opportunity," Ju added.
- The Kimchi premium had swelled to a three-year high of 22% earlier Wednesday in a sign of retail frenzy.
- However, executing a classic arbitrage strategy by purchasing bitcoin on western exchanges and dumping on Korean platforms is quite challenging because local exchanges only allow trading in KRW pairs, as discussed on Tuesday.
- Some whales have been depositing coins on Korean exchanges, as tweeted by Ju. Investors typically move coins to exchanges when they want to liquidate their holdings.
- Analysts say a potential dump in South Korea may not significantly impact bitcoin's global average because the Asian giant now contributes less than 2% of the worldwide trading volume versus 8% in 2017.
- Bitcoin is currently trading near KRW 73,000,000 on Upbit and changing hands at $57,500 on major western exchanges – down 1% on the day, as per CoinDesk 20 data.