Bitcoin ( BTC ) price briefly reached a new high of 96,734,000 South Korean Won, or $72,504, on March 5, 3:00 pm (UTC), on Upbit, the largest cryptocurrency exchange in South Korea.

BTC/KRW 1-Day chart. Source: Upbit

Bitcoin price “Kimchi premium" is back

This price difference is known as the Kimchi Premium  or Korea Premium Index — and it has been in an uptrend along with BTC price since early February.

The Korea Premium index rose from 5.19 on Feb. 28 to 6.84 on March 5, according to on-chain data resource CryptoQuant.

The Korea Premium, 1-month chart. Source: CryptoQuant

This coincided with  Bitcoin price hitting a new all-time high above $69,200 on March 5, driven by continued inflows into United States’ Bitcoin ETFs.

The Bitcoin price rally is mainly driven by institutional demand in the United States, Ho Chan Chung, an analyst at CryptoQuant, told Cointelegraph.

This isn’t the case in South Korea, however. Since the country has no spot Bitcoin ETFs, retail spot buying mainly drives the rising Bitcoin price.

The Kimchi premium was first observed in 2016 and spotlighted in a 2019 paper from the University of Calgary. According to the researchers, between January 2016 and February 2018, South Korean Bitcoin exchanges witnessed an average of 4.73% higher prices than exchanges in the United States.

During Bitcoin’s bull run in December 2017 , South Korean exchanges were trading Bitcoin nearly 50% higher than most exchanges worldwide, causing CoinMarketCap to remove some Korean exchanges due to “extreme divergence in prices from the rest of the world.” 

During the 2021 bull run, the Kimchi premium peaked at 21.56% on May 19 when Bitcoin was trading above the $36,000 level before reaching its previous all-time high in November 2021.

Some traders are likely attempting to profit off these price differences between various exchanges, also known as arbitrage. However, this premium has mainly remained due to market inefficiencies, particularly during strong uptrends. 

South Korea mulls spot Bitcoin ETFs

Meanwhile, amid the growing interest in Bitcoin, South Korea’s financial watchdog is reportedly considering allowing spot Bitcoin ETFs in the country, which could ultimately end this price difference if approved. 

“Among authorities, I am one of those who are positive about virtual assets, while there are others who are wary, and we need to hear their opinions as well. We are internally discussing it,” said Lee Bok-hyun, governor of the Financial Supervisory Service, according to a March 5 Reuters report .

Back in January, South Korea’s financial authorities said they didn’t plan to regulate the sales of Bitcoin futures ETFs. However, it added that brokerage sales of spot Bitcoin ETFs could be in violation of the Capital Markets Act.

The Korea Premium Index remains intact with Bitcoin trading at around 93,800,000 KRW ($70,000) on Upbit at the time of writing, while BTC price elsewhere is hovering around $67,000.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.