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Kimchi Premium reenters South Korea, Gold price inflates

Kimchi Premium reenters South Korea, Gold price inflates

On Wednesday, While Bitcoin is trading at $35,462 on CoinMarketCap, the price on the Korea-based Bithumb exchange stood at $43,537 (at the time of publication). It is trading at $8,000 higher in South Korea than in other markets because capital flow controls continue to enforce the “kimchi premium”.

Kimchi premium is a prominent bitcoin market indicator. The kimchi premium represents the contrast between bitcoins price on South Korea bitcoins and the going rate on other worldwide exchange venues. The market variance results from South Korea’s capital controls and commands limiting foreign investors from trading on domestic exchanges. The Bank of America (BofA) said in a report that

The onshore price for cryptocurrencies in Korea is persistently above international prices suggesting this to be a result of effective capital control that prevents effective arbitrage of onshore and offshore prices. Korean capital controls allow the ‘Kimchi premium’ to persist.

The assessed daily volume of Cryptocurrency in South Korea appeared at $1.31 trillion in the prior quarter of 2021. Everyday exchanging volume sometimes surpasses the consolidated exchanging volume on the Korean Composite Stock Price Indexes (KOSPI) and Korean Securities Dealers Automated Quotations (KOSDAQ) sharemarket.

Price of Gold Surges

While the interest for crypto advances in South Korea, so does the for gold. Gold costs increased four days straight, hitting heights not witnessed since January.

Prices of gold, a critical safe-haven asset, began to rise amid nervousness over an economic slowdown arising from the COVID-19 pandemic and consequent inflation alarms.

Jeon Kyu-Yeon, an analyst at Hana Financial Investment, said that 

Speculation has mounted since late last year that investors are expected to shift their attention from gold to Bitcoin, but it seems unlikely at this point. As of now, there is a low possibility that Bitcoin will function as a critical safe-haven asset in the market just like gold does

However, since 2019 the inflation rate climbed from below zero to 2.3% in South Korea its only suggestable that S.Korea should incline more towards investment in Cryptocurrency such as Bitcoin to reduce the inflation risk.