Kimchi premium rises to 11% — Is Bitcoin now in a shopping stage of the cycle similar to that of 2017?

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Is a growing premium in South Korea a top indicator or a hint that the Bitcoin rally has just begun?

The price of Bitcoin (BTC) remains in the $56,000-$60,000 range, as the so-called “Kimchi premium” surges to yearly highs.

When Bitcoin trades at a higher price in South Korea than in other global markets such as the United States, a kimchi premium forms.

In 2017, the Kimchi premium reached 20%, leading Bitcoin to sell at about $24,000 in South Korea and about $20,000 in the United States.

 

Korea Premium Index. Source: CryptoQuant.com

Last week, on March 29, this premium resurfaced, hovering at 6%, which has since climbed to around 11%.

Kimchi premium is at 11%, is this bad for Bitcoin?

When the Kimchi premium hit an all-time high, the Bitcoin market topped and suffered a brutal reversal almost immediately after.

While the premium indicates that the South Korean cryptocurrency market is being overheated, it is not big enough to indicate a peak.

Ki Young Ju, CEO of CryptoQuant, said that although the premium is concerning, the fundamentals of Bitcoin seem to be powerful.

The disparity between now and 2017 is that South Korea accounts for just 1.7 percent of the overall Bitcoin market’s trading volume.

As such, Ki explained that even if the South Korean market sees a pullback as a result of the rising premium, it would not have as big of an impact it had in 2017. He noted:

“$BTC fundamentals still look good, but the Korean bubble is worrisome to me. Shitcoins prices are skyrocketing, and Korean crypto trading volume has surpassed the national stock exchange (KOSPI). Even if the bubble collapses, the impact is unlikely to be significant since it’s just 1.7%”

More significantly, unlike in 2017, the latest Bitcoin boom is being led by banks and high-net-worth individuals, as indicated by large outflows from Coinbase.

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However, one of the reasons why many observers are worried about South Korea’s overcrowded cryptocurrency trading sector is because there is considerable interest in newly-emerging crypto assets.

Instead of Bitcoin and Ether (ETH), the cryptocurrencies with the largest amount on Bithumb, for example, are frequently emerging altcoins that have just been around for a few months.

 

High-net-worth investors are continuing to buy

Less than a week ago on March 29,  Ki emphasized that shorting Bitcoin is not the ideal trade as Coinbase Pro is seeing large outflows.

Bitcoin Coinbase Pro outflow. Source: CryptoQuant.com

Outflows from major exchanges typically mean that institutional investors are acquiring Bitcoin and converting their funds to self-hosted wallets.

At the time, Ki stated:

 

“Punting a short on $BTC now looks not a good idea. Less likely to go below 52k as institutions might have bought $BTC at that level.”

Since then, Bitcoin has risen by about 5% and has been in a relatively steady uptrend, likely due to revived signs of weakening in the US dollar.

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