Since when into the coin market, the term 'kimchi premium' is circling around.
(there is some premium sticking on it?)
this phenomenon mean that buying same Bitcoin in S.korea(Korbit, bithumb, Coinone) is more expensive than buying in foreign exchange of cryptocurrency.
per example, in 27th of June at 3PM, let's compare the price of Ethereum
Price of 1 Ethereum in S.korea is 316,000~317,000 won, and in U.S.A 277,500won which is 15% expensive in our country
It could be different due to the type of coin and the period of buying, in fact in S. korea cryptocurrencies are 5%~25% expensive than the other foreign country
Thanks to this phenomenon called "spread deal", some people make money by using this arbitrage trading.
Purchase in cheaper price the Bitcoin in U.S.A and transfer them via to the coin wallet and sell them back in Korean exchange of cryptocurrencies.
Some point of view expect that 'This phenomenon that happened transiently due to overheating in the Korean Kimchi market'.
In fact, domestic virtual money investment is hot compared to the economic scale is which 20 ~ 40%
An analysis shows that Korean investors who can not use foreign exchange for lack of English or other reasons made them trade only in exchanges in Korea which lead happened this kind of "premium"
If the spread trade increase in the long term and if the domestic market subsides, this premium will disappear
Those who will make long-term investments are advised to buy coins from overseas coin exchanges rather than domestic coin exchanges as much as possible.
Is it so?
I think this 'kimchi premium' will last a long time. Of course, it will gradually ease.
The reasons are as follows.
- "Risk > utility" of spread trade
Why this arbitrage trading less active than you think?
That's because of the risk of crypto currency transfers.
In theory, transfering the virtual currency should be made within 10 to 20 minutes which is one block mining time,
Remittances can take several hours, several days, or longer, due to the volume of transactions, restrictions on the coin exchange, and withdrawal limitations
(The delayed remittance comments of the Etherium and Bitcoin in the nation's largest coin site 'dden!
Of course, if a virtual currency goes up and down between 1%~2% as an existing exchange rate, even though the remittance take five days to transfer it wont be a problem
but it is an fatal issue in coin market that fluctuate by 5 to 10% per day, sometimes by 2 to 30%.
I bought a 15% cheaper Bitcoin in the US and sent it for 3 days. And then the Bitcoin price dropped by 20%. This is almost horror movie scenario but it is possible.
All economic activity should be "utility >> risk", but the profit that can be realized by spread trading is 10 ~ 15%, which is more than the possibility of price fluctuation due to 3 ~ 4 days remittance.
In fact, the fact that the Kimchi premium is rising at the peak of risk, such as yesterday's (6.26), when the price of coins fluctuates sharply, proves this fact.
I should remind you that trying to put your feet on the spread trade, you could be easily "Fxxk"
- Coin market where the rule of family members does not apply
The premise that the Kimchi premium will disappear is the 'law of family members'.
(Wherever in the world, McDonald 's burgers were created to show the same quality that made the' Big Mac ' price index. Wherever in the world coin's utilities are similar?)
Without the trade barriers, the same thing must be priced the same everywhere in the world. The block-chained coin seems to fit well with this rule of thumb.
There is no need for extra transmission costs, and there are no legal restrictions on transmission.
By the way, there is one more important premise.
Is the demand of coin in Korea and the coin in foreign country are "the same thing?"....
In countries where coins are partially institutionalized, coins are half-currency, half-investment
In S, Korea, it is totally an investment asset. There are no more than 50 stores in the country where coins can be used.
In addition, there are many "coin supporters" who invested in stock direct investment in Korea and switch in coin investment
For those who are looking for profits through short-term transactions, the transaction value of coins is more than just 'investment assets'.
Because if you have a 10,000-bit coin which is not for use and it's a coin to sell for profit.
Therefore, rather than buying a coin at a low price, you need a coin that can be quickly redeemed when the price rises
After all, the value of one Bitcoin in "Poloniex" and one Bitcoin listed on "Coinone" are very different.
For this reason
In the long term, Kimchi premiums may not disappear for at least several months, perhaps forever.