What Is the Kimchi Premium? Why It Appears and How to Read It
You may have heard news reports of a “5% kimchi premium.” The kimchi premium can reveal market overheating and sentiment as well as a price difference. Here is how to calculate and use it.
What Is the Kimchi Premium?
It is the percentage by which a coin's price on a Korean exchange exceeds its price on an overseas exchange. If the same Bitcoin costs more on Upbit than Binance, that difference is the kimchi premium. If the Korean price is lower, it is a negative or reverse premium.
Why Does It Appear?
- Capital controls — Restrictions on freely moving won and coins overseas prevent price differences from closing immediately.
- Overheated domestic demand — Strong Korean buying interest can push domestic prices up faster.
- Exchange rates and transfer costs also contribute.
How to Calculate It
Premium (%) = (Korean price ÷ (Overseas price × Exchange rate) − 1) × 100
Example: Upbit BTC at KRW 104 million, Binance at $70,000, exchange rate KRW 1,400 per dollar.
Overseas price in won = 70,000 × 1,400 = KRW 98 million.
Premium = (104 ÷ 98 − 1) × 100 ≈ +6.1%
Example: Upbit BTC at KRW 104 million, Binance at $70,000, exchange rate KRW 1,400 per dollar.
Overseas price in won = 70,000 × 1,400 = KRW 98 million.
Premium = (104 ÷ 98 − 1) × 100 ≈ +6.1%
Reading the Market Through the Premium
- A rapidly rising, strongly positive premium → Domestic overheating and concentrated retail buying; sometimes seen near short-term highs.
- A negative premium → Weak domestic sentiment; sometimes seen near market lows.
- Combining the premium with funding gives a fuller view of crowd sentiment.
Arbitrage can narrow the premium, and it is weak as a standalone trading signal. Use it as a supplementary indicator alongside trend and liquidation data.
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