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Domestic 74 million won vs foreign 67 million won … More than 10% of the price difference
Earned trading volume is also second only to the dollar … “Watch out for worrying bubble reversal”
The price of Bitcoin again hit an all-time high. On the afternoon of the 2nd, the price of bitcoin is displayed at 74.1 million won on the bulletin board in the lounge of Upbit, a cryptocurrency exchange in Gangnam-gu, Seoul. Reporter Kim Youngwoo [email protected]
There are signs of abnormal overheating, with the price of bitcoin traded in Korea being 10% higher than overseas. In other countries, the rise in bitcoin prices is not significant, but only in Korea, it is reaching the highest level every day. The share of buying and selling won bitcoins also outperformed the euro and rose to second place after the US dollar.
According to the national cryptocurrency exchange Upbit on the 2nd, bitcoin surpassed 7,408 million won a piece at 2 p.m. on the same day. An Upbit official explained: “The highest price has been marching since the 30th of last month.” In the last week, it has also increased by 10 million won.
The bitcoin investment craze is blowing especially hard in Korea. When the price of Korean bitcoin surpassed 74 million won, the US cryptocurrency exchange Coinbase stood at $ 59,456 (around 67.33 million won). This is 9.94% lower than in Korea. Last week’s increase was just $ 4,500, which is half the Korean level.
Since bitcoin is increasing relatively fast in Korea, the share of transactions is also increasing. Coinhills, a site for broadcasting the conditions of the cryptocurrency market, counted the share of bitcoins (22,602) traded in Korean won in the world for 24 hours until 2 p.m. this day at 5.59%. It is only surpassed by dollar-based trading (82.73%). Just a week ago, won-based transactions were fourth after the dollar, the euro, and the yen.
Seok-moon Jeong, Director of Kobit, said: “Because Korea cannot easily buy bitcoins abroad due to strict currency transaction laws, it is easy to cause an imbalance in supply and demand. We must not forget that the ‘Kimchi Premium’ disappeared at once and was the most shocked in the world. “
Cryptocurrencies Grow Bubble Concerns … Warning From “Debut at Beginning of Collapse in 2018
Bitcoin over 74 million won … ‘Kimchi Premium’ is 7 million won
As the price difference between bitcoins traded in Korea and foreign countries widens by more than 10%, experts express concern that “ a malicious bubble like 2018 is happening. ” It is pointed out that even if the value of bitcoin is recognized, too high a price compared to foreign countries is a sign of speculation.
○ Increase in the price difference of domestic and foreign bitcoins
As of 3 p.m. on the 2nd, the price of bitcoin traded on Upbit, a national cryptocurrency exchange, surpassed 74 million won. It was 10.5% higher than Bitcoin (67,000 won) traded on Coinbase, an American cryptocurrency exchange. The price difference between the two exchanges at the same time a day ago was 7.9%, but as time passed, it increased to 9.1% in 4 hours and 50 minutes. At 1 a.m. this day, it even passed 10%. The phenomenon of ‘Kimchi Premium’, where the price of the cryptocurrency traded in Korea is higher, does not appear only in Bitcoin. Stratis’ ‘Kimchi Premium’, a type of altcoin, reached 160%.
In the industry, if the ‘kimchi premium’ exceeds 5%, it is analyzed as a sign of speculation. This is because as of 2019, foreign cryptocurrency exchanges, including Coinbase, have been able to buy cryptocurrencies with a credit card at a 4-5% fee. When the price difference between domestic and foreign cryptocurrencies exceeded 5%, it was possible to make a profit by selling cryptocurrencies purchased abroad. Due to the influence of this type of arbitrage trading, the ‘Kimchi Premium’ is generally considered around 5%. The fact that the ‘Kimchi Premium’ exceeds 10% means that the demand to buy cryptocurrencies from the Korean cryptocurrency exchange is increasing, so it cannot be covered by arbitrage trading.
Domestic and foreign price differences also affect Korea’s strict currency trading laws. Some investors use the arbitrage method of reselling cryptocurrencies in Korea after remittances to overseas banks or switching accounts to buy cryptocurrencies at low prices. However, if the amount of remittances exceeds 1 billion won, it violates the Foreign Exchange Transactions Act, so there is a limit to the demand for domestic cryptocurrencies. Kobitt director Jeong Seok-moon noted that “the only thing that will increase abroad is 10%, but in Korea, where cryptocurrency cannot be easily imported from abroad, it will often increase more than 20% due to the supply shortage “.
In the industry, the ‘kimchi premium’ is still lower than in 2018, when it peaked, but there are concerns that it is at the beginning of speculation. At the end of October 2017, the price difference, which exceeded 10%, shot up to 60% in early 2018, three months later, and fell to 0% in just one month. Park Sang-hyun, a researcher at Hi Investment & Securities, said: “Even considering the fact that overseas funds are not moving freely, the current ‘Kimchi Premium’ is not at a normal level.” Bank of Korea Governor Lee Ju-yeol also said in a report to the National Assembly last month that “Bitcoin is an asset with no intrinsic value, so it will show high price volatility.”
○ Institutional investment flow, actually decreases
There are still optimistic signs abroad that the current uptrend could continue. This is because cryptocurrencies are increasingly recognized by global financial institutions as ‘investment products’. CNBC, a US economics broadcaster, reported that Goldman Sachs, a global investment bank (IB), will launch bitcoin-related products for personal asset management clients on the 31st of last month. On this day, Visa also announced that it will introduce USD currency, a cryptocurrency, as a payment method. John Worldron Goldman Sachs, Chief Operating Officer (COO), recently said: “There is a growing demand from clients who want to invest in bitcoins, so we are looking for ways to fulfill this.”
However, it is not easy to argue that the influx of institutional investors, which has been argued by Bitcoin ascendants, is declining in recent years. According to JP Morgan on the 16th of last month, the number of bitcoin purchases by institutional investors in the first quarter of last year was 172,684, 43.6% less than in the fourth quarter of last year (30,6658). The buying trend of individual investors around the world is also slowing down. The number of bitcoins that individual investors bought in the third quarter of last year was 210,4591 pieces in the third quarter of last year, 200,0005444 pieces in the fourth quarter, and 187426 pieces in the first quarter of last year, decreasing every quarter.
Sang-bong Kim, an economics professor at Hansung University, warned: “Even if ‘Kimchi Premium’ goes up, there are a growing number of domestic investors who don’t care.” If the time comes when investors find out that Bitcoin is worthless, the bubble may burst. “
Reporter Park Jin-woo [email protected]
