The Korea Herald


End to ‘Kimchi premium’? Bitcoin nosedives below W8m

By Son Ji-hyoung

Published : Feb. 2, 2018 - 15:47

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Bitcoin, the largest cryptocurrency in the world in market cap, sank further in South Korea on Friday, amid government talks for tighter regulation on the unfettered market. 

It was trading below the world average in Korea at around 7.7 million won ($7,090) per coin at around 9:50 p.m., a decrease of nearly 25 percent in 24 hours, according to the a local cryptocurrency exchange Bithumb.

Bitcoin plummeted a day after the police raided the operator of Bithumb and India decided to eliminate the use of cryptocurrencies there. 

(Yonhap) (Yonhap)
The virtual coin was trading below 10 million won, for the first time since Nov. 25. In Korea, the price of a bitcoin peaked at 26 million won on Jan. 6. The price has since nosedived over 65 percent.

Other coins have been riding on a similarly steep downswing Friday. As of 8:30 p.m., Friday, ripple plunged 33 percent in a day and ethereum sank 29 percent.

The plunge raised fear in the market, suggesting that the crashing value may put an end to the virtual coin craze known as “Kimchi premium.” 

At 9:50 p.m. Friday, bitcoin in Korea was trading 9 percent lower than the world average. Bitcoin was trading at $7,800 at 9:50 p.m., down 17 percent from 24 hours earlier, according to a global coin tracker CoinMarketCap.

This came in stark contrast to the phenomenon named after the signature Korean dish. The kimchi premium refers to a price premium to buy bitcoin here using fiat money like the Korean won. At its height in early January, bitcoin on Korean exchanges such as Bithumb, Upbit, Coinone and Korbit was trading about 50 percent higher than the global price.

Such an arbitrage gap then led to a decision by CoinMarketCap on Jan. 9 to exclude Korean exchanges in price calculations, citing “the extreme divergence in prices from the rest of the world.” CoinMarketCap resumed to track Korean prices starting Wednesday.

The premium became mediocre amid Korea‘s weekslong confusion on whether to carry out an all-out ban on cryptocurrency exchanges.

The police raided an office of BTC Korea, operator of Bithumb, Thursday. During the seizure, investigators secured data related to two hacking attacks last year, which resulted in information leaks of over a combined 31,500 users and 4,900 accounts registered on the Bithumb website, as well as theft of encrypted coins from 466 accounts.

Earlier in January, authorities zeroed in on local exchanges on suspicion of illegal activities or tax evasion. Tax authorities raided BTC Korea on Jan. 10, while on Jan. 9, police investigated officials of Coinone for allegedly failing to prevent the gambling activity of traders on its exchange. The state-run Korea Communications Commission in December imposed fines totaling 60 million won on BTC Korea for alleged negligence in the protection of user information.

Adding to the downward pressure was India Finance Minister Arun Jaitley’s pledge to “eliminate the use of” encrypted assets in “financing illegitimate activities or as part of the payments system,” in a budget speech Thursday.

The world has been jumping on a trend to form or strengthen regulatory frameworks to prevent crimes involving coins encrypted on distributed ledgers like blockchain. On Tuesday, the Securities and Exchange Commission of the United States halted an allegedly fraudulent initial coin offering -- an act of raising funds for a blockchain-related business, largely targeting retail investors.

South Korea has also been on course to implement a system for cryptocurrency purchase using bank accounts with holders‘ identification verified. Anonymous accounts are not allowed to be used to buy coins, starting Tuesday.

There are some 1,500 encrypted coins and tokens listed as of Friday, according to CoinMarketCap.

By Son Ji-hyoung