Bitcoin Survey Shows Chinese Crypto Traders Are Marking Down South Korean Buyers, But They’re Not (Opinion)

Bitcoin arbitrage traders in China and the “kimchi premium” to Bitcoin prices in South Korea were recently studied in South Korea on cryptocurrencies. The characterization and recommendations for cross-border Bitcoin transactions are missing some key economic underpinnings.

A recent study on cryptocurrencies released by Incheon National University and the Bank of Korea has become a hot topic. The authors found a strong correlation between the ‘kimchi premium’ and international remittances to China.

‘Kimchi Premium’ Is Sustainably High Bitcoin Price In South Korea

Kimchi Premium is the high price of Bitcoin and cryptocurrencies in South Korea. This is due to the increasing demand for bitcoin relative to fiat currency within the South Korean economy. This is also a result of the reduced supply of BTC.

The authors of this paper speculate that Chinese arbitrage traders are selling Bitcoin to Koreans. They suggest that it is because Chinese Bitcoin sellers are eyeing a kimchi premium. They sell it specifically to South Korean crypto traders to get a higher price.

The authors of this paper attribute this to Chinese crypto traders taking advantage of South Korean crypto traders. They call South Korea a “target” and say Chinese crypto traders are “taking advantage of excess demand.” Additionally, they are also calling for international standards of cryptocurrency regulation to protect investors.

However, Chinese crypto traders are not escaping South Korean crypto traders. Bitcoin buyers in South Korea are willing to be betrayed if it is true. They are willing to pay higher prices to get more Bitcoin.

Chinese meet higher demand

This research started at Incheon National Economics Department. But paper itself is not very economical. The author does not seem to consider cross-border transactions of Bitcoin economically.

Higher prices exist specifically to attract more sellers. This is how the market works to balance supply and demand. South Korea does not have as many bitcoins as the market people would like.

As such, they are willing to pay higher prices to get more Bitcoin. That’s the free market. not exploitation. This is how the price distributes resources where people want them most in the fair trade-offs we all make.

Chinese traders who receive a premium for kimchi are responding to incentives. Bitcoin buyers in South Korea are incentivizing it with their own money. They use the higher price they are willing to pay as bait for BTC.

Ironically, the paper calls for policy intervention. This is ironic because it is the policy (South Korea’s strict capital controls) that is causing the Bitcoin shortage in South Korea. That BTC shortage is the cause of the kimchi premium.

A reduction in government regulation of financial markets could facilitate lower premiums. A mutually beneficial trade relationship between Chinese and South Korean cryptocurrency traders is not exploitation. economy.