As recent trends from CryptoQuant indicate, Bitcoin’s (BTC) Kimchi Premium has rocketed to levels unprecedented in the past three years, hitting the 12% mark. This considerable upswing arrives amidst a substantial decrease in Bitcoin’s value, driven by rising concerns about the potential economic effects of imminent US trade duties on Canada, Mexico, and China.
Drill Down: Factors Boosting Kimchi Premium to a 3-Year High
From the 4th of February onwards, US President Donald Trump is expected to kick off a 25% tax rate on Canada and Mexico, while China will grapple with an extra 10% duty on top of existing charges. As a consequence, the cryptocurrency market has witnessed a severe drop, the total market cap shriveling from $3.7 trillion on the 30th of January to a mere $3.1 trillion at present.
In the midst of the crypto market’s downturn, an unexpected twist has transformed the landscape: Bitcoin’s Kimchi Premium has soared a staggering three-year high. Usually, when South Korea’s BTC demand spikes, the Kimchi Premium follows suit. However, this surge defies the norm, taking place during Bitcoin’s downturn rather than an uptrend—a clear sign of other market forces at work.
Ki Young Ju, CEO of CryptoQuant, notes in an X post that the current Kimchi Premium surge is unrelated to BTC demand. His commentary unveils a surprising truth: the midst of the Bitcoin dip saw the Kimchi Premium spike not because of South Koreans buying the dip, but due to BTC-USD conversions. Few South Koreans are converting BTC into KRW, a trend likely mirrored worldwide.
A likely explanation for this trend is the ongoing trade tensions. As US tariffs are poised to take effect, the US dollar (USD) may gain strength against other fiat currencies, making it an attractive safe haven during economically uncertain times. Consequently, South Korean investors may be choosing to convert BTC to USD instead of Korean won (KRW).
What Direction is Bitcoin Heading Next?
Over the past 24 hours, the crypto market has seen more than $2 billion in liquidations. The vast majority of these have been long positions, surpassing liquidation volumes recorded during major crash events, like the COVID-19 induced market drop in March 2020 and the FTX collapse in November 2022.
As Trump’s tariffs loom, he is reportedly still in discussions with Canadian Prime Minister Justin Trudeau, sparking hopes of a reconsideration or delay in trade levies. If these tariffs are called off, the cryptocurrency market could recuperate some of its most recent losses.
However, for Bitcoin to maintain its bull market structure and stride towards a new all-time high (ATH), it must reclaim the $105,000 price point. Some analysts predict that Bitcoin may need to dip to the $76,000 range as part of its journey upwards. At the time of publication, Bitcoin’s price stands at $96,864, with a 2.2% decrease over the past 24 hours.
FAQs
What is the Kimchi Premium?
The Kimchi Premium refers to the difference between the price of Bitcoin in South Korea compared to international exchanges. It serves as an indicator of demand for Bitcoin in South Korea.
Why has the Kimchi Premium surged recently?
According to CryptoQuant CEO Ki Young Ju, the recent surge is not due to increased BTC demand in South Korea. Instead, it’s likely due to BTC being converted to USD in the face of potential economic instability caused by impending US trade tariffs.
How will US trade tariffs impact the crypto market?
It is suspected that the upcoming tariffs may strengthen the USD against other fiat currencies. This situation could encourage more investors to convert their BTC to USD, potentially driving up the Kimchi Premium further.
What could influence Bitcoin’s future performance?
Several factors could influence Bitcoin’s performance, including demand changes, global economic conditions, and investor sentiment. It’s also important to monitor decisions such as trade tariffs which can impact market dynamics.
In conclusion, the recent surge in Bitcoin’s Kimchi Premium amidst a severe downturn presents multifaceted market dynamics. As global trade tensions continue to unfold, their impact on the cryptocurrency market is becoming more profound, offering both challenges and opportunities for investors. Alongside insights from platforms like Finances Zippy, continuous monitoring of market trends can help investors navigate through the uncertain times ahead.
