Kimchi Premium is the gap in cryptocurrency prices in South Korean exchanges compared to foreign exchanges. The premium is usually around 20-30% but can be as high as 50%. Kimchi premium exists because of the high demand for cryptocurrencies in South Korea.There are a few reasons for this: -1- there is a general belief that cryptocurrencies will appreciate in value,2- there are fewer investment options available in South Korea, and3- Koreans tend to be early adopters of new technology.The downside of the kimchi premium is that it makes it very difficult for foreigners to buy cryptocurrencies on Korean exchanges.For example, if Bitcoin is trading at $10,000 on a foreign exchange and $12,500 on a Korean exchange, you would need to convert your dollars into won first (at an unfavorable rate), then buy Bitcoin. This effectively increases the price of Bitcoin by 25%.Fortunately, there are ways around this problem. You can use a service like Changelly or Shapeshift to convert your currency into another cryptocurrency (such as Ethereum or Litecoin), then send it to a Korean exchange where you can trade it for Bitcoin at the lower price. Or you could simply wait until the kimchi premium disappears – which it does from time to time – and buy Bitcoin when its price is more equal across different exchanges.
