On the 9th, Huobi Korea (CEO: Park Si-deok), a global virtual asset exchange, delivered a message about investing in virtual assets due to overheating of kimchi premiums with a price difference of more than 10% on the 9th.
Kimchi premium refers to the difference between the price of a virtual asset traded in Korean Won on a domestic exchange and the price of a virtual asset traded in USD or Tether (USDT) on a foreign exchange. If the domestic price is higher than the overseas price, it is called’GIMP’, and if it is low, it is called’Yeop’ (reverse premium).
Recently, as bitcoin continued to rise for the longest period of 7 months, the influx of new virtual asset investors increased, and the word’money copy’ (usually used to mean that any coin purchased among investors will increase) is popular. It is analyzed that the overheated investment pattern has increased the kimchi premium to a maximum (highest) 22%. As the premium rises, there is a risk of a plunge of more than 30% per day, as in the last 7 days, if bulk sales for arbitrage trading are released.
In the case of domestic exchanges, the order book cannot be shared with overseas, so it is possible to adjust the market price without being affected by overseas prices. For this reason, it can be seen that new buyers in Korea are more likely to purchase virtual assets without knowing the premium even if the price of virtual assets on the Korean exchange is higher when investing. If demand rises in an overheated market and the kimchi premium continues to rise, there is a big potential risk in the volatility market.
When investing in virtual assets while avoiding the risk of kimchi premium, it is possible to purchase virtual assets at the same market price as overseas at a domestic global exchange that shares an order book with overseas exchanges. Unlike the market price, there are also aspects that can protect prices. It provides a service that converts to automatic tether when depositing KRW through the simple transfer function.
Huobi Korea analyst Choi Jin-young said, “As the kimchi premium is still in the 10% range, there is a risk of a plunge if the volatility market continues.” It is recommended to make an investment decision by comparing the price.”
Author/ Translator: Jamie Kim
Bio: Jamie Kim is a technology journalist. Raised in Hong Kong and always vocal at heart. She aims to share her expertise with the readers at blockreview.net. Kim is a Bitcoin maximalist who believes with unwavering conviction that Bitcoin is the only cryptocurrency – in fact, currency – worth caring about.