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Bitcoin Retail FOMO Brings a Heap of ‘Kimchi Premium’ to S. Korea

Bitcoin’s price premiums on South Korean exchanges have returned amid the latest bitcoin bull market.

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The “kimchi premium” has returned.

Price premiums for bitcoin on South Korean exchanges have hit two-year highs, indicating retail investment interest in cryptocurrencies is surging in that country. However, analysts and traders warn that certain market players could take advantage of arbitrage opportunities, resulting in short-term price volatility.

The “kimchi premium,”  named for a popular Korean pickled side dish, also helps to explain why bitcoin prices drop during Asia’s trading hours – some traders sell bitcoin at higher prices on South Korea-based crypto exchanges.

As of press time, bitcoin’s “kimchi premium,” as quantified by the difference in prices between South Korean’s upbit exchange and Binance, was at 4.15%, or 1,444,941 won (approximately $1328.97), according to real-time exchange data-tracking site scolkg.com. Such a mark-up in prices has not been seen since early 2018.

Data from blockchain analytics firm CryptoQuant also shows the price gap between Korean exchanges and the rest of the market went as high as 6.18% on Jan. 4. On that day, 3,001 bitcoin flowed to Bithumb, one of the biggest crypto exchanges in South Korea.

“It is clear that the greatest selling happened during the Asia trading hours,” Andrew Tu, an executive at quant firm Efficient Frontier, told CoinDesk.

South Korea’s retail FOMO in crypto

The “kimchi premium” first appeared in early 2016, according to researchers at the University of Calgary. Between January 2016 and February 2018, it averaged at 4.73% and reached its highest at 54.48% in January 2018.

There are several reasons for the sometimes exceptionally wide price gap, including historical background, economic situation and regulatory environment. 

Driving some of the sudden bitcoin frenzy could be the delayed implementation of a 20% crypto tax in South Korea, according to Simons Chen, executive director of investment and trading at Hong Kong-based crypto lender Babel Finance. He said some traders may be rushing to purchase cryptocurrencies before the tax is implemented in 2022.

South Koreans are buying crypto on exchanges closed to non-Korean nationals, making prices a little bit removed from the global market.

“The South Korean government has banned exchanges from servicing foreigners,” according to the book “Mastering Blockchain,” co-written by CoinDesk’s senior markets reporter, Daniel Cawrey. “In addition, South Korea has capital controls that limit the amount of funds that can leave the country.”

Jason Kim, the chief investment officer of Tokyo-headquartered investment firm Anchor Value,  noted the lack of institutional traders in South Korea’s crypto market, meaning that the market is mainly driven by retail customers who use exchanges more frequently and tend to follow “fear of missing out” (FOMO) trends during each bull run, likely causing more drastic market volatility. Retail crypto buyers are able to do so easily because they can make their purchases using their local currency, the won (KRW). 

“Korean exchanges have BTC/KRW pairs,” Ki Young Ju, chief executive office of CryptoQuant, told CoinDesk. “It’s straightforward to integrate a bank account and exchange deposit account to buy bitcoin with KRW. We can buy bitcoin with just a couple of clicks via online banking.”

Culture is also a factor. In a country that rose from the ashes of Korean War, there is an underlying theme of becoming rich in a short period of time, much the same way South Korea’s economy had grown, said Anchor Value’s Kim. After traditional high-return investment options such as real estate became too expensive for most people, many turned to bitcoin and other cryptocurrencies, which went from almost nothing to skyrocketing in just a few short years.

All these factors were ingredients in bringing back crypto’s price difference in South Korea, after it shrank close to nothing  since late 2019.

After bitcoin’s price broke the $33,000 threshold over the past weekend, searching the keyword “bitcoin” on Naver, Korea’s most popular search engine, surged again after peaking in mid-December.

The search trend of the keyword “bitcoin” on Naver since January 2020.
Source: Naver

Trading volumes on major cryptocurrency exchanges in South Korea also climbed up in the beginning of January to their highest levels in the past 30 days.

“We start seeing more ‘kimchi premium’ from the last few weeks,” Sinhae Lee, partner of Shanghai-based blockchain consulting firm Block72, told CoinDesk. “The deposit of KRW to Korean exchanges has been increasing, and I think that Korean retailers are entering the market after seeing a strong price increase of bitcoin.”

Hedge funds play arbitrage trades

During the previous appearances of the “kimchi premium,” it was harder for traders to do arbitrage trades – buying at a lower price in one market and simultaneously selling in another market for a higher price – due to capital controls and high transaction costs on exchanges in South Korea, according to a 2018 report by New York-based fintech company Cindicator Analytics.

Some now say that experienced traders have been able to take advantage of arbitrage in this bull market, evidenced by the multiple huge sums of bitcoin inflows to Korean exchanges. Most recently, CryptoQuant’s on-chain data alerts warned earlier Tuesday of aggregated 1,882 bitcoin inflows to Bithumb.

“People are more prepared compared to 2017 when the ‘kimchi premium’ hit like 50%,” CryptoQuant’s Ki said. “We have many arbitrage hedge funds who run their money on Korean and non-Korean exchanges.”

Over the past few weeks during Asian trading hours, bitcoin faced sell-offs, as shown on CoinDesk’s BPI.

CoinDesk’s BPI

“On a technical basis, things have been overbought for a while,” Efficient Frontier’s Tu said about the recent small-scale market sell-off since bitcoin’s price broke $33,000. “It’s likely just the market consolidating, with primarily Asian sellers taking profits at this level.

Disclosure

Source: https://www.coindesk.com/kimchi-premium-reappears-retail-fomo-south-korea

Blockchain

European Central Bank’s president calls for greater regulation of bitcoin.

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According to the Reuters report, the European Central Bank president Christine Lagarde has called for greater regulation of bitcoin and other cryptocurrencies. She linked the use of cryptocurrencies with global criminality and money laundering. ECB chief Lagarde said the digital currency was increasingly being used by criminals worldwide to cover their tracks online and launder money beneath the authorities’ detection. She said criminals are relying on BTC and patchy regulation to move illegitimate money without oversight or supervision.

ECB President calls for more urgency around the global regulation of crypto.

ECB president called for more urgency around the crypto sector’s global regulation and more effort to develop common standards to prevent criminals from abusing digital currencies as a backdoor to money laundering and other nefarious activities. Highlighting the “funny business” going on in BTC markets, Lagarde described cryptocurrency criminality as “totally reprehensible.” “BTC is a highly speculative asset, which has conducted some funny business and some interesting and reprehensible money laundering activity,” she added. Currently, crypto regulations remain in a grey area in most countries, but regulators are catching up gradually. 

Crypto regulations begin to tighten up after bitcoin’s massive rally. 

The most notable example of crypto regulation has been in anti-money laundering, with exchanges and other crypto services now adhering to standardized AML requirements. The news coincides with a rally in BTC prices in recent months, spurred on by an increasing mainstream interest in BTC tokens. This has led to further calls for regulation worldwide, amid fears that more speculators could end up losing all of their money. Combined with soaring rates of fraud and concerns over money laundering and other criminality running through BTC, Lagarde said the time for light-touch regulation of the digital asset was over.

Source: https://coinnounce.com/european-central-banks-president-calls-for-greater-regulation-of-bitcoin/

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Why this on-chain analyst thinks Bitcoin whales aren’t institutions

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While most had high expectations from the crypto-market for the year 2021, it’s safe to say that the market has well and truly exceeded these expectations. Not only did the world’s largest cryptocurrency, Bitcoin, breach the $40,000-mark, but the industry’s cumulative market cap also went past $1 trillion.

Source: CoinMarketCap

The market and its largest cryptocurrency’s movements make for interesting reading, especially when its charts are observed. In fact, price charts noted an almost vertical movement by Bitcoin, suggesting that this bull run has far outpaced the bull run of 2017.

In such a case, the common perception is that the reason Bitcoin has seen such immense buying power is because a majority of this buying has come from institutions. The same sentiment was highlighted recently by Anchorage Co-founder Diego Monica who, while noting that institutions have more tolerance for volatility and are professional investors, said,

“This rally is absolutely followed and made by the institutions.”

As a result of this, investing in Bitcoin becomes less about following a fad and more about making an allocation to an uncorrelated asset class for purposes relating to capital preservation and appreciation. In fact, many have suggested that at current price levels, Bitcoin might even be too expensive for non-institutional investors to enter the market.

However, on-chain analyst Willy Woo isn’t so sure that this bull run is solely institutionally-driven. On a recent episode of the Unchained podcast, he said,

“We thought it would be, and right now the thing is, I don’t actually think that it is.”

According to Woo, Bitcoin’s bull run is being driven by the institutional narrative of institutions getting behind the idea of Bitcoin and crypto. While institutions have been suggesting that they are going to deploy funds, the majority of them are still yet to do so, he added.

In fact, it may be this validation from institutions that brought in many high net worth investors to this space, with family offices buying in at higher price levels.

Woo explained that a combination of things has contributed to his certainty about family offices making capital allocations towards crypto, including first-hand conversations with people in the space disclosing their intent to do so.

That being said, the main part of such certainty comes from his observation of capital flows on-chain. He explained that the value of withdrawals on exchanges is increasing, which at first glance, seemed to signify that institutions are present. However, a closer examination of clusters of wallet addresses pointed to the fact that a single entity controls multiple addresses.

“It’s not corporation scale where you’re talking tens of thousands of Bitcoin that are being held,” he claimed, adding, “The number of whales holding thousand Bitcoins or more is skyrocketing, and so are the smaller allocations of around 100 and 250.”

Source: https://ambcrypto.com/why-this-on-chain-analyst-thinks-bitcoin-whales-arent-institutions

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ETH Price Analysis [WoW]: Ethereum Price Trading at key Pivot, Oscillators Indicate Strong Momentum Despite Overbought Conditions

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  • ETH price breaking key weekly resistances and confirming them as support.
  • Breach of ETH price discovery is to be backed with increasing volume.
  • Oscillators suggesting strong momentum still present despite overbought conditions.

ETH price is currently trading at a true pivot where a bullish weekly candle close will greatly increase the probability of breaking into price discovery. Price action has been making consecutive higher highs and higher lows since it’s March 2020 Bearish Expansion. The projection remains bullish until proven as this is a strong weekly uptrend.

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ETH Price Analysis: Weekly Chart 

ETH price Analysis weekly
ETH price Analysis weekly

Preluding to the chart above, a strong uptrend is evident with continuous acceleration leading to a potential parabola. The 21 MA has provided a reliable Dynamic Support that has led to a strong Bullish Volatility Expansion from the lows. 

Key Weekly S/R levels have been breached with conviction; price action has confirmed S/R Flip retests along the way with further Bullish Volatility Expansions. ETH price trading in such a volatile range is deemed to have strong swings thus evidently, the volume profile has been increasing. 

Volume influxes are a key indication of a strong uptrend as bullish volume follow through is what drives price action. As evident on the chart, there has been a Volume Climax Node. Bearish volume is still below average as the current weekly candle trades open. For further follow through, an influx in volume is required to break the All-Time High with persuasion. 

The current shape of the weekly candle is of a Bullish Hammer; however, this is not confirmed until an official close. There has been a strong buy-back from the S/R Flip Retest which is indicative of strength. The next weekly candle open will be deemed telling of the overall direction of the trend. 

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Now holistically assessing the oscillators, momentum is still intact with the bulls, epically how the stochastics have been behaving.  

ETH Price Analysis: Weekly Stochastic oscillator

ETH price Analysis weekly: Stochastic oscillator
ETH price Analysis weekly: Stochastic oscillator

As evident, each and every bull cross has led to a substantial Bullish Volatility Expansion in price action. The stochastic helps to monitor momentum in the prevailing trend. It can remain trading in overbought regions for an extended period of time, epically in a strong up trend. Ethereum has an immediate Bull Cross coming to fruition, this will be confirmed on the next weekly candle close. Holding true will store momentum for the break of the All-Time-High. 

ETH Price Analysis: Weekly Relative Strength Index [RSI]

ETH price Analysis weekly: RSI
ETH price Analysis weekly: RSI

Furthermore, observing another key oscillator is the RSI that is responsible for measuring the speed and velocity of price action. Preluding to the image above, Ethereum’s RSI is considered to be in overbought regions however back testing swing high. This is considered to be very bullish if respected, breaking down will mean a reversion in price action. As long as the RSI and Stochastics maintain their respective bullish control zones, ETH price will remain very bullish as it comes close to price discovery, 

What to Expect for Weekly ETH Price ?

In conclusion, Ethereum price remains quite strong as it is approaching its All-Time High. Price action has been maintaining consecutive higher highs and higher lows. This next weekly candle close will be highly indicative of the overall direction. Both key oscillators are suggesting that the momentum is stored with the bulls. A true break is likely to be backed with increasing volume as price action enters price discovery. 

Hope this article helps in the preparation for the next volatility expansion in Ethereum. Follow us at tradingview for more in detail crypto price analysis. 

To keep track of DeFi updates in real time, check out our DeFi news feed Here.

FBC13

Source: https://coingape.com/eth-price-analysis-weekly-price-oscillators-suggest-strong-moomentum-overbought/

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