Bitcoin has been reaching new highs daily, but the domestic market is showing a slightly slower price. Due to lower transaction volumes on domestic exchanges compared to overseas ones, the phenomenon of 'reverse kimchi premium' is recently growing. Experts point out the unique characteristics of the domestic market, where corporate investment is restricted.
On the 15th, according to blockchain data analysis company CryptoQuant, the Bitcoin price formed at major domestic exchanges the previous day was found to be nearly 1.6% lower than the overseas average price. In fact, as of 1 p.m. the previous day, Bitcoin recorded $120,900 (approximately 166.87 million won) on overseas exchanges such as Binance, while at the same time, it was traded for more than 2 million won cheaper at 164.17 million won on the domestic exchange Upbit.
Not only Bitcoin, but Ethereum (-1.58%), Ripple (-1.59%), and Tether (-1.57%) also showed significant price differences. While Bitcoin is breaking all-time highs in the global market, the domestic market is particularly subdued. In general, the virtual asset industry estimates that if the price difference with overseas exchanges exceeds 1%, it indicates a large price gap.
The domestic virtual asset market has commonly experienced the 'kimchi premium' phenomenon, where major virtual asset prices are formed higher than overseas due to structural limitations on participation from institutions and foreigners. Especially in a bullish market, the high market demand often outstrips supply, leading to a significant surge in the kimchi premium. In fact, looking at March last year when the kimchi premium was high, when Bitcoin first surpassed 100 million won on overseas exchanges, the domestic price was about 12% higher than abroad.
However, as institutions began to enter the global virtual asset market, the market landscape started to change. Last year, when Bitcoin spot exchange-traded funds (ETFs) were launched in the U.S. and institutions began purchasing them, the market shifted from being centered around numerous retail investors to institutional investors. In contrast, in Korea, investors are unable to invest in virtual asset spot ETFs, making it challenging for institutional investors to participate in the market. Although some non-profit foundations have started transactions, the lack of substantial demand, unlike overseas, prevents asset prices on domestic exchanges from keeping pace.
Moreover, among overseas corporations, there is an increasing number of cases adopting the 'Bitcoin TREASURE' strategy, consistently purchasing Bitcoin as a new financial strategy to diversify risk (hedge). MicroStrategy, which holds the most Bitcoin in the world, is a representative case, and over 150 companies globally, including Trump Media and Marathon Holdings, are strategically purchasing Bitcoin. According to the virtual asset industry, the changes in the amount of Bitcoin held by corporations worldwide are estimated to have increased from 42,000 in 2020 to over 720,000 (over 1 million if unlisted companies are included) at present.
The contraction of the domestic virtual asset exchange market also has an impact. According to a centralized exchange market share report published by the virtual asset data platform CoinGecko on the 30th of last month, Upbit's market share worldwide decreased from 8.38% at the end of January this year to 6.16% at the end of April. During the same period, Binance increased from 35.76% to 38.01%.
CryptoQuant CEO Joo Gi-young noted that 'the inability of Bitcoin prices to keep up despite recent all-time highs is due to decreased interest from individual investors and demand from foreign institutional investors.' He added, 'Recently, the buying pressure mainly comes from institutional investors and ETFs, notably including MicroStrategy (MSTR).'