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What is Kimchi Premium?

Kimchi premium is a term used in the cryptocurrency market to describe the difference between prices in South Korea and other international markets. It is based on the idea that there has historically been an average of 10-20% higher price for cryptocurrencies traded in Korean exchanges compared to other international exchanges. This discrepancy in prices can be attributed to various factors such as limited supply, demand from investors, speculation among traders, and regulatory factors.

The concept of kimchi premium has become increasingly relevant since 2017 when Bitcoin’s value began rising exponentially. As more people and institutions got involved with cryptocurrency trading, the kimchi premium became more pronounced due to South Korean regulations which made it difficult for foreign investors to access local markets. This increased the demand for the cryptocurrency in the local market and thus, the prices rose even more.

It’s important to note that kimchi premium can also be seen in other markets such as Japan and China, but it is most pronounced in South Korea. Moreover, due to the highly speculative nature of cryptocurrency trading, this price difference can fluctuate rapidly and unpredictably. As a result, investors need to be aware of these factors when considering investments in international markets. Understanding kimchi premium is an essential part of making informed decisions about investing in cryptocurrencies.

Overall, kimchi premium is an important concept to understand when trading cryptocurrency in international markets. By taking into account the different factors that can affect the market and being aware of potential price discrepancies, investors can make more informed decisions about their investments. Ultimately, this could lead to a more successful trading experience and greater returns on investments.

It is also important to remember that kimchi premium is a highly speculative concept, and as such its value can change rapidly. This means investors need to be vigilant in monitoring the market and keeping up with any changes or updates in regulations. Additionally, it's beneficial for investors to research different international markets before trading so they are fully aware of any potential differences in prices that could arise due to kimchi premium. By doing this, investors can ensure they are making the most informed decisions when investing in cryptocurrencies across multiple exchanges.

Ultimately, kimchi premium is an important concept to understand when trading cryptocurrency internationally. Understanding this phenomenon can help investors make more informed decisions about their investments and increase their chances.

Simplified Example

Kimchi premium is like when you want to buy a toy that is very popular and everyone else wants it too. Just like how a toy store might have a limited number of a certain toy, the stock market also has a limited number of certain stocks. When a lot of people want to buy the same stock, the price goes up, just like how the price of a toy goes up when it is popular. Kimchi premium is when the price of a stock in South Korea goes up a lot because a lot of people in South Korea want to buy it. It's like a toy store where all the kids want the same toy, and the price goes up because of that.

History of the Term "Kimchi Premium"

The precise origin of the term "Kimchi Premium" is uncertain, yet it is commonly believed to have surfaced in the early 2010s, aligning with the ascent of Bitcoin and the growing prevalence of cryptocurrency trading in South Korea. This term is employed to characterize the occasional substantial price differential observed between Bitcoin prices on South Korean cryptocurrency exchanges and those on global exchanges.

Examples

The Korean cosmetics industry is an example of the ‘kimchi premium’ in action. Global beauty brands such as Estee Lauder have seen their stock prices increase by up to 10 percent after launching products in South Korea, largely due to increased demand from local consumers.

Another instance of the kimchi premium was demonstrated when US-based ride-hailing company Uber chose to launch its services in South Korea first before any other Asian market. By doing so, they were able to leverage the strong interest that local prospective customers had for their service and capitalize on it quickly before expanding into other countries.

Lastly, one of the most famous examples of a successful kimchi premium occurred when the virtual reality game Pokemon Go was launched in South Korea several years ago. Millions of users flocked to the app, and its revenue from the country skyrocketed to account for around a third of its total revenue worldwide. This shows just how powerful the impact of local demand can be on a company's success in South Korea.

  • Market: A place or system where buyers and sellers come together to exchange goods, services, or financial instruments.

  • Exchange: The platform for trading cryptocurrency, allowing users to buy and sell different digital assets.