Kimchi Premium Leaps to Three-Year High as Crypto Market Faces Historic Losses

Key Takeaways

• The Kimchi premium hit a new three-year high.
• Analysts suggest that global selling pressure and fluctuations in the Dollar Index (DXY) are influencing the trend.
• The market crash has led to speculation about a potential market top, exacerbated by political instability and new tariffs under President Trump.

On a day when the crypto market experienced one of its largest liquidation events , wiping out more than $400 billion, the Kimchi premium soared to 12%, reaching a new three-year high.

While historically, a high Kimchi premium is seen as a bullish sign of strong buying demand; the most recent rise is not driven by Korean traders scooping up discounted Bitcoin.

Instead, it highlights a complex shift in regional dynamics, fueled by the significant crash in Bitcoin (BTC) prices and broader market sentiment.

Korean Traders Move Money to US Dollar

The Kimchi premium refers to the price gap when Bitcoin (or other cryptocurrencies) trades at a higher value on South Korean exchanges than on others globally.

Market analysts, including Ki Young Ju , point out that the recent surge in the Kimchi premium is primarily due to Korean traders moving Bitcoin into U.S. dollars rather than increased demand for the digital asset itself.

As Bitcoin’s value dropped, some Korean traders converted their holdings into USD, causing the premium to spike.

This shift is seen as a response to broader economic pressures.

The global selling trend, exacerbated by fluctuations in the Dollar Index (DXY), is pushing more traders in South Korea to convert their holdings into a more stable currency.

Thus, the premium does not reflect bullish behavior but is a symptom of broader market uncertainty, with traders hedging against potential further declines.

Bitcoin sees Kimchi premium in South Korea. Source: CryptoQuant

The Impact of Global Political and Economic Turmoil

The crypto market’s latest sell-off on Monday, Feb. 3, was sharper than those witnessed during the COVID-19 pandemic and the FTX collapse.

This has led some to speculate that the recent price highs before the crash marked a market top.

Some traders believe President Donald Trump’s trade wars triggered the steep decline. In his first week in office, Trump imposed a series of tariffs expected to burden consumers.

This development has added uncertainty to the market, with traders potentially looking to hedge against further geopolitical instability.

The movement of funds from Bitcoin to the U.S. dollar signals a cautious stance as traders brace for retaliatory actions from other nations in response to Trump’s trade policies.