Bitcoin (BTC) was trading at $5,000 higher in South Korea than in other markets on Wednesday as capital flow controls continue to enforce the “kimchi premium.” While Bitcoin was trading at $39,932 on Coinbase at the time of publication, the price on the Korea-based Bithumb exchange stood at $45,115.
According to a recent Bank of America statement, the kimchi premium is a result of capital flow controls aimed at stopping the cross-border transfer of “hot money,” reports Reuters.
“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 Bank of America said in a report on Tuesday.
The 12.5% premium on Bitcoin in Korea persists despite the coin’s recent 32% losses and signs of increased transfers to centralized exchanges. The Bank of America’s report noted that daily cryptocurrency trade volume reached new heights in Korea in the first quarter of 2021, exceeding 1,480 trillion won ($1.3 trillion).
While demand for crypto continues in South Korea, so too does demand for gold. Gold prices rose four days in a row leading up to Tuesday, May 18, hitting heights not witnessed since January.
The current price per gram of 68,200 won ($60.36) is 9.4% higher than it was two months ago, in what the Korean Herald identifies as a sign of increasing inflation concerns. While still well below historic levels, the Korean inflation rate jumped 1.5% in April alone. Since 2019 the inflation rate climbed from below zero to 2.3%.
