The price of Ethereum appears to be recovering nicely over the weekend after a period of investor uncertainty. The “king of altcoins”, following what looked like an aggressive return above the $4,200 level earlier this week, is now lagging under the psychological $4,000 mark.
While the Ethereum price has been building some positive momentum over the past day, the shadows of the October 10 downturn still seem to be weighing on investor sentiment. A market phenomenon known as the “Kimchi Premium” suggests a few tedious weeks ahead for the second-largest cryptocurrency.
What Happened Last Time Kimchi Premium Saw A Similar Surge
In a recent post on the social media platform X, market analyst CryptoOnchain revealed that the Kimchi Premium has been on the rise over the past weeks. This observation is based on the movement of the on-chain indicator Korea Premium Index, which measures the price difference between South Korean exchanges and other global exchanges.
This metric, or the “Kimchi Premium,” shows how much extra Korean traders are willing to pay for a particular cryptocurrency (Ethereum, in this case). When the index is positive, it means that Korean retailers are willing to pay a premium for the crypto assets. Meanwhile, a negative Korean Premium Index signals that the retailers are only willing to buy the cryptocurrency at a discount.
According to CryptoOnchain, the Korea Premium Index for Ethereum recently saw a notable surge to around 8.2%, its second-highest level this year. The market analyst noted that this level of Kimchi Premium is a troubling sign, as it historically suggests extreme retail FOMO (Fear of Missing Out) and a potential price top.
Typically, whales tend to take advantage of the price gap by selling on Korean exchanges when the Korea Premium Index is on the rise. Due to increased selling pressure, the Ethereum price now faces a greater risk of correction.
For instance, the last time ETH saw a Kimchi Premium this high was in January, coinciding with the price fall to around $1,500. With this in mind, investors might want to tread with caution, as the odds of a sustained downward trend are significantly higher.
Ethereum Price At A Glance
As of this writing, the price of ETH stands at around $3,875, reflecting no significant change in the past 24 hours. In what was expected to be a bullish period for the cryptocurrency market, “Uptober” has not particularly lived up to the expectations of investors. After a positive start to the month, the Ethereum price is currently down by almost 10%.
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After a brief pullback to $60,000 on Wednesday, the world’s largest cryptocurrency Bitcoin (BTC) has given a healthy recovery. The Bitcoin (BTC) price is up 4% in the last 24 hours shooting past $66,000 once again.
Bitcoin (BTC) Kimchi Premium Jumps 10%
In a recent statement, CryptoQuant CEO Ki Young Ju revealed that Bitcoin’s price premium in South Korea has reached an impressive 10%, marking its highest level in two years. Ju highlighted the resurgence of Korean retail investors in the cryptocurrency market, indicating a renewed interest and confidence among local traders.
The Kimchi premium refers to the variance in cryptocurrency asset prices between South Korean exchanges and those abroad. This premium has been on an upward trajectory alongside the BTC price since the beginning of February.
According to on-chain data from CryptoQuant, the Korea Premium index surged from 5.19 on February 28 to 6.84 on March 5. This increase occurred simultaneously with Bitcoin reaching a new all-time high surpassing $69,200 on March 5, attributed to ongoing investments in Bitcoin ETFs in the United States.
Unlike the US, there are still no Bitcoin ETFs in South Korea to witness strong institutional participation. As a result, retail spot buying has been majorly driving up prices on the Korean exchanges.
In December 2017, amid BTC’s bullish surge, South Korean exchanges were trading Bitcoin at nearly 50% higher prices compared to most global exchanges. As a result, CoinMarketCap had to delist some Korean exchanges due to “significant price disparity from the global average”.
Similarly, during the 2021 bull run, the Kimchi premium reached its peak at 21.56% on May 19, coinciding with Bitcoin’s price exceeding $36,000 before eventually reaching its previous all-time high in November 2021.
South Korea Eyes for A BTC ETF Approval
South Korea, recognized for its tech-savvy populace, is considering the possibility of approving Bitcoin Spot ETFs. As per a recent report, Lee Bok-hyun, the governor of the Financial Supervisory Service, mentioned in a radio interview that authorities are currently discussing the legalization of Bitcoin Spot ETFs in the country.
However, the classification of BTC as an underlying asset remains a significant concern for South Korean regulators. While financial authorities in January expressed no plans to regulate Bitcoin ETFs, the sale of spot Bitcoin ETFs by brokerages raised queries under the Capital Markets Act.
The presented content may include the personal opinion of the author and is subject to market condition. Do your market research before investing in cryptocurrencies. The author or the publication does not hold any responsibility for your personal financial loss.
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