Kimchi premium hits 11% — Is Bitcoin now in a 2017-esque retail stage of the cycle?

Kimchi premium hits 11% — Is Bitcoin now in a 2017-esque retail stage of the cycle?

The price of bitcoin (BTC) continues to fluctuate between $56,000 and $60,000, while the so-called kimchi premium is at a one-year high.

The kimchi premium occurs when bitcoin trades at a higher price in South Korea than in other major markets such as the United States.

In 2017, the kimchi premium exceeded 20 percent, causing bitcoin to trade at around $24,000 in South Korea, while it exceeded nearly $20,000 in the US.

Korean premium index. Source: CryptoQuant.com

Kimchi premium hits 11% — Is Bitcoin now in a 2017-esque retail stage of the cycle?

This premium rose again last week, March 29, to about 6%, a figure that has now risen to about 11%.

Kimchi’ssurcharge of 11%, is it bad for bitcoin?

The last time Kimchi’s premium reached a record high, the bitcoin market peaked and underwent a sharp correction almost immediately thereafter.

While this premium suggests that the South Korean crypto-currency market is showing signs of overheating, it is not high enough to mark a peak.

Ki Young Joo, CEO of CryptoQuant, said the premium is worrying, but the fundamentals of bitcoin look strong.

However, the difference between now and 2017 is that South Korea only accounts for 1.7% of the global bitcoin trade volume.

In this regard, Ki said that even if the South Korean market suffers a setback from the premium increase, the impact will not be as strong as in 2017. He noted:

The fundamentals of $BTC still look good, but the Korean bubble worries me. Beef prices are skyrocketing and Korea’s cryptocurrency trading volume has surpassed that of the national exchange (KOSPI). Even if the bubble were to collapse, the effect would probably not be great, as it would only be 1.7%.

More importantly, unlike 2017, the current bitcoin rally is being led by institutions and high net worth investors, as evidenced by Coinbase’s massive capital outflow.

But one of the reasons many analysts are concerned about South Korea’s crowded cryptovalut market is that there is a lot of interest in emerging cryptocurrencies.

Instead of Bitcoin and Ether (ETH), the cryptocurrencies with the highest volume on Bithumb, for example, are often new Allcoins that have been around for months.

High yield investors continue to buy

Less than a week ago, on the 29th. In March, Kee pointed out that shorting bitcoin is not a perfect operation because Coinbase Pro is undergoing many changes.

Bitcoin Outflow Pro. Source: CryptoQuant.com

Kimchi premium hits 11% — Is Bitcoin now in a 2017-esque retail stage of the cycle?

The outflow from major exchanges generally indicates that institutional investors are buying bitcoin and putting their assets into standalone portfolios.

Kee then said:

Postponing the decline in the $BTC price at this time does not seem like a good idea. It’s less likely to go below 52k because institutions can buy $BTC at that level.

Since then, bitcoin has risen about 5% and is showing a relatively stable uptrend, perhaps because the US dollar is again showing signs of weakness.

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