Kimchi Premium Rises To 3-Year High, What’s Driving It?

According to data from CryptoQuant, Bitcoin’s (BTC) Kimchi Premium has surged to a three-year high of 12%. This spike comes amid a steep decline

CryptoQuant data reveals a surprising surge in Bitcoin's (BTC) Kimchi Premium, reaching a three-year high of 12% amid a steep decline in the flagship cryptocurrency. This spike in the premium typically indicates a strong demand for BTC in South Korea, but in this case, it coincides with a downturn in the crypto market.

As a response to the looming trade tariffs, the crypto market has experienced a sharp decline with its total market cap decreasing from $3.7 trillion on January 30 to $3.1 trillion at the time of writing.

This development comes as US President Donald Trump is set to impose 25% tariffs on Canada and Mexico, starting February 4, with an additional 10% tariff on China's good over and above the existing levies.

In light of this, and contrary to expectations, Bitcoin's Kimchi Premium has surged to a three-year high. Usually, such a scenario would indicate a heightened demand for BTC in South Korea.

However, this time, the surge occurs during a Bitcoin downturn rather than an uptrend, suggesting other underlying market forces at play.

In a post on X, CryptoQuant CEO Ki Young Ju highlights that the current Kimchi Premium surge is not due to increased BTC demand, stating:

"Check out the chart again. The kimchi premium spiked at the local bottom – not because Koreans are buying the dip, but because BTC is being converted to USD. Few Koreans are converting BTC into KRW. Other countries are likely seeing a similar trend."

This trend may be driven by the ongoing trade tensions, with US tariffs set to take effect. As a result, the US dollar (USD) is expected to strengthen against other fiat currencies, making it a more attractive store of value during periods of economic uncertainty.

In response, South Korean investors might be converting BTC to USD instead of Korean won (KRW).

Over the past 24 hours, more than $2 billion in crypto liquidations have occurred on various exchanges, with the vast majority being long positions. This liquidation volume surpasses those seen during major crash events like the March 2020 COVID-induced market drop and the FTX collapse in November 2022.

As the US tariffs are set to take effect tomorrow, Trump is reportedly still in talks with Canadian Prime Minister Justin Trudeau, offering some hope that the trade levies could be reconsidered or delayed. If the tariffs are called off, the crypto market may regain some of its recent losses.

However, for Bitcoin to maintain its bullish structure and continue pushing toward a new all-time high (ATH), it must reclaim the $105,000 price level. Some analystsحتی predict that BTC might need to retest the $76,000 range before resuming its upward trajectory.

At press time, BTC trades at $96,864, down 2.2% in the past 24 hours.