Are Chinese crypto traders exploiting the Kimchi premium, or is it just free-market behavior?
There’s a crypto study out of South Korea recently of Chinese Bitcoin arbitrage traders and Korea’s “kimchi premium” on Bitcoin prices. Its characterization of the cross-border Bitcoin trade and recommendations miss some key economic foundations.by Incheon National University and the Bank of Korea is making the rounds. The authors found a strong correlation between the “kimchi premium” and international remittances to China.is the higher Bitcoin and crypto prices in South Korea.
The paper’s authors frame this as Chinese crypto traders taking advantage of Korean crypto traders. They call South Korea a “target” and say Chinese crypt traders are “exploiting excess demand.” Moreover, they also call for international standards of regulation of cryptocurrency to protect investors.But Chinese crypto traders aren’t fleecing South Korean crypto traders. The South Korean Bitcoin buyers don’t mind being fleeced if that’s what it is.
The Chinese traders getting the kimchi premium are responding to an incentive. Bitcoin buyers in Korea raise that incentive with their own money. They use the higher price they’re willing to pay as BTC bait.
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