Kimchi premium is the price difference that occurs when cryptocurrencies, most notably Bitcoin, trade at higher prices on South Korean exchanges than on overseas exchanges. In practice, it describes a localized market premium rather than a change in the underlying asset itself, the same coin can be quoted differently depending on where it is bought and sold.
Why it happens
The kimchi premium is largely driven by market structure. South Korea has a highly active retail trading base, and bursts of domestic demand can push local exchange prices upward faster than global prices adjust. At the same time, capital controls, banking rules, and exchange compliance requirements can make it difficult for traders to move fiat currency in and out of the country freely. When moving funds across borders is slow, costly, or restricted, the normal arbitrage process that would equalize prices across exchanges becomes less effective.
How it shows up in real trading
A common example is a trader noticing Bitcoin priced higher on a Korean exchange than on a US or European venue. In a frictionless market, they could buy Bitcoin cheaply abroad, transfer it to the Korean exchange, sell it at the higher local price, then convert the proceeds back to their home currency, locking in the spread. In reality, fees, transfer times, withdrawal limits, identity checks, and limits on converting Korean won can prevent or delay this trade, allowing the premium to persist.