ECONOMICS
FINANCIAL MARKETS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Premium in equities trading in South Korean exchange vs Rest of the World
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Premium in cryptocurrency trading in South Korean exchange vs Rest of the World
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Premium in gold trading in South Korean exchange vs Rest of the World
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Premium in debt trading in South Korean exchange vs Rest of the World
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Detailed explanation-1: -It is a measure of how much more South Koreans pay for bitcoin. The spread, the difference between the price of bitcoin on South Korean and non-Korean crypto exchanges, is called the “kimchi premium”. It’s named after kimchi, a popular Korean pickled side dish.
Detailed explanation-2: -Kimchi premium is the cryptocurrency price differential between South Korean exchanges and foreign exchanges. Cryptocurrency traders quickly took advantage of the kimchi premium. Since 2017, the kimchi premium’s steadily increased, reaching as high as 50%.
Detailed explanation-3: -The kimchi premium is not illegal or used for arbitrage trading. However, traders need to be aware of South Korea’s tight foreign exchange laws and regulations. Arbitrage trading with the kimchi premium is slightly more complex.
Detailed explanation-4: -A 2019 paper from the University of Calgary found that the Kimchi Premium first occurred in 2016. According to the researchers, between January 2016 and February 2018, South Korean Bitcoin exchanges charged an average of 4.73% more than their United States counterparts.
Detailed explanation-5: -The “Kimchi premium” is a term used to refer to the gap between the price of bitcoins in South Korean versus Western exchanges. This difference, which was first observed in 2016, is caused due to the high demand for a limited supply of bitcoins.