The South Korean exchange, Bithumb has caused the Kimchi Premium and has been investigated by the Financial Services Commission (FSC).
After a major hack that managed to steal $30 million worth of cryptocurrencies last June, Bithumb has disabled deposits and withdrawals and allowed only existing users to perform trading activities on their platform.
These practices have caused gaps in prices in the Bithumb platform with the global exchanges for some cryptocurrencies, which is known as the Kimchi Premium.
As an example, Ethos is traded at around $1,07 on Binance on July 28, whereas it's traded at around $6.5 on Bithumb on the same date. Other tokens such as ICON and Aelf also showed unreasonably high prices on Bithumb compared to the global crypto exchanges.
CCN analyzed this as a result of an unbalanced influx of buyers and sellers, which is caused by the fact that no new capital has been injected into the trading platform since June 20. Furthermore, this Kimchi Premium practice has also caused Bitcoin to rebound as much as 3.5% in the last hours.
The South Korean Financial Services Commission (FSC) has expressed their concerns through the Chairman who said, "The government’s practical policies led the ‘Kimchi Premium’ to disappear in South Korea. At its peak, the ‘Kimchi Premium’ in the local cryptocurrency exchange market reached 50%, due to an unusual spike in demand and speculation."
Last month, the Chairman, Kim Yong-Bum said that the government has done everything within their capacity to eradicate the Kimchi Premium from the local market, claiming, "As of current, the price of cryptocurrencies is nearly identical to other markets, demonstrating stability in the South Korean cryptocurrency market."
However, Bithumb easily made all the government's efforts futile by inflating crypto prices again in the last one month. It is said that the current market recovery is a result of crypto price manipulation by a South Korean exchange.