If you buy and sell bitcoin abroad, you earn 12 million won… Bubble warning

Concern overheating of Kimchi Premium
Korean exchanges are’excluded’ in global market prices

The bitcoin price is displayed on the price display of Upbit Lounge, the cryptocurrency exchange in Gangnam-gu, Seoul.  Photo = Yonhap News

The bitcoin price is displayed on the price display of Upbit Lounge, the cryptocurrency exchange in Gangnam-gu, Seoul. Photo = Yonhap News

In theory, it is confirmed that if you buy bitcoin from an overseas virtual asset (cryptocurrency) exchange and sell it on a domestic virtual asset exchange, you can make a profit of up to 10 million won or more. This is because the so-called’Kimchi Premium’ is more expensive in domestic cryptocurrency than overseas.

There are also voices in the industry that are concerned about the overheating of the domestic virtual asset market. When calculating the global bitcoin price, the price of the domestic exchange is regarded as’overheating’ and excluded.

According to the related industry on the 7th, the price of bitcoin in Korea was formed at a price range of about 20% higher than that of overseas. As of 9 am on the day, it was traded at 78.62 million won on Upbit and 78.33 million won on Bithumb, but it was traded for $58,16 on Binance, the world’s largest cryptocurrency exchange. Looking at the exchange rate (1118.51 won per dollar), the overseas bitcoin price is about 65 million won.

Bitcoin, which costs 65 million won on foreign exchanges, is sold for 78 million won on domestic exchanges, so if you transfer and sell bitcoins bought on foreign exchanges to domestic exchanges, there is a difference of over 13 million won.

Based on the amount of overseas remittances that do not require an explanation of the reasons under the Foreign Exchange Transactions Act, which is 50,000 dollars per year (approximately 5,583 million won), it is approx. You can get a profit of 12 million won.

However, to enable such arbitration, you must have a domestic bank account linked to a domestic exchange account, as well as an overseas bank account and an overseas cryptocurrency exchange account. Entry barriers are quite high for domestic residents to open overseas bank accounts and to newly hold accounts on foreign exchanges, so there are not many cases where such arbitrage transactions are possible.

For this reason, some investors buy cryptocurrencies with little difference in price from overseas and then send them to overseas cryptocurrency exchanges, and buy bitcoins and send them to domestic exchanges.

Market price display at Upbit Lounge, a cryptocurrency exchange in Gangnam-gu, Seoul.  Photo = Yonhap News

Market price display at Upbit Lounge, a cryptocurrency exchange in Gangnam-gu, Seoul. Photo = Yonhap News

The supply-demand imbalance was attributable to the domestic bitcoin price, which has risen to the extent that investors are engaged in arbitrage transactions. As the number of investors increased, the demand to buy bitcoin increased significantly, but the amount of bitcoin distributed in Korea did not increase that much.

Last month, the number of users of Upbit, a domestic virtual asset exchange, was 3.2 million, three times higher than in January this year (1.19 million). It seems that this is because interest has increased as the price of bitcoin has jumped since the end of last year.

As investors increased, K-Bank, an internet specialty bank that signed an alliance with Upbit to issue real-name accounts, also grew sharply in the first quarter of this year. According to K Bank, the number of customers reached 3.91 million at the end of last month. K-Bank attracted 1.57 million customers from 2018 to 2020. This means that there are more customers in the last three months, when the price of cryptocurrency has soared, than in the last three years.

Another domestic virtual asset exchange Bithumb also saw a significant increase in new members. Compared to the same month last year, the number of new members of Bithumb surged 77% in January, 80% in February, and 78% in March this year.

The size of these exchanges is one of the best in the world. The Block, a media specialized in cryptocurrency, reported that the amount of upbit transactions last month recorded 83.8 billion dollars (about 94.58 trillion won), ranking second among the world’s fiat currency-based exchanges. The number one exchange is the US Coinbase, which recorded 87.3 billion dollars, and the difference from Upbit is only 3.5 billion dollars (about 3.900 trillion won).

CoinMarketCap also counted the number of weekly visits (excluding applications) of Upbit as of the previous day to 2.57 million. This is ranked 6th out of a total of 306 exchanges where you can check the ranking. Bithumb also ranked 9th with a total of 204,3549.

If you buy bitcoin from abroad and distribute it in Korea, the price difference will decrease and the kimchi premium will go down, but it is difficult to increase the supply quickly in a short time due to the strict foreign exchange trading method.

Overseas are also paying close attention to the kimchi premium, which has risen to the 20% range. CoinMarketCap decided to exclude Korean exchanges from the average global bitcoin price on this day. CoinMarketCap announced that “in Korea’s cryptocurrency exchanges, a number of cryptocurrencies are traded with premiums.”

“The Korean cryptocurrency trading volume has exceeded the KOSPI. Bitcoin’s fundamentals are good, but Korea’s bubble is worrisome,” said Ki-young Ki, CEO of Crypto Quant. He said, “Even if the bubble in Korea goes down, Korea’s share of the global bitcoin market is only 1.7%, so it will not have a big impact on the price of bitcoin,” he said.

Sesung Oh, reporter of Hankyung.com [email protected]
Article reports and press releases [email protected]

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