Local investors flock to virtual assets to cover themselves against trade war
The latest threats from US President Donald Trump to impose prices on the main business partners fueled the “Kimchi premium”, the price difference between cryptocurrency values in South Korea and international markets.
Earlier this month, when Trump announced his intention to impose tariffs of 10% on China and large 25% prices in Canada and Mexico – on which he then returned – the price Bitcoin plunged on overseas scholarships. The market has fluctuated, reacting to the expectations that higher prices would trigger inflation, which prompted central banks to tighten monetary policies.
Despite fluctuations in the world’s decline, Bitcoin has remained in high demand in South Korea. As the price of bitcoin was slower to decrease here, the price difference between the best Corpto Crypto exchange binbit and the Binance of exchange based in the United States against Bitcoin was pushed to almost 10% the February 3 – The most important gap in almost 10 months.
Although the gap has been narrowed at 7% in the following days, which suggests a gap in investor reactions between the United States and Korea due to time zone differences, industry officials think that The gap can reflect the efforts of Korean investors to cover themselves against the risks of trade war by using cryptocurrency.
In recent months, the Kospitic reference index has undergone a clear drop whenever Trump revives tariff threats, because Korea dependent on exports would be likely to suffer from increased trade war. The Korean won has also weakened against the US dollar, reporting other economic slowdown problems.
“With the drop in deposit interest rates and the slowdown in the local stock market market, part of the floating capital seems to have moved to the cryptography market,” said Kim Min-Seung, research manager in Korbit , one of the first five exchanges of Korean cryptocurrency.
“We cannot exclude the possibility that cryptocurrency earn a stronger presence after Trump’s return to the White House,” he added.
Although the price difference has finally moderated at around 4% Tuesday, industry experts remain cautious, warning that the gap is still at an alarming level.
“Since the premium has remained around 1 to 2% in recent months – and even reversed at negative moments – a difference of 4% cannot be overlooked,” said a local exchange manager.
The persistent price difference on the Corés cryptography market is largely awarded to high demand in a closed market environment. On the local exchanges of cryptocurrency, only retail investors are authorized to negotiate and the derivatives, which help to discover prices, remain prohibited.
Despite these regulatory obstacles, Korean investors continue to show a strong interest in cryptocurrency.
According to financial service data published on Tuesday, commercial deposits in the best Corpo’s Crypto schpto purses amounted to 10.65 Billions of Won (7.33 billion dollars) last month, or almost 5.21 Billions of wons in January 2024.
“Given the relatively short story of cryptocurrency, it is difficult to define an exact threshold for when a price difference becomes” concerning “,” said Kim.
“However, the key problem is that this price distortion stems from the closing market environment of Korea, which hinders an effective price discovery.”
While Trump’s trade policies continue to trace world markets, the Korean crypto trading bonus could be reflected in broader economic uncertainties – and a continuous challenge for investors sailing on a limited market.
