Bitcoin Study Claims Chinese Crypto Traders Are Driving Up Prices For Korean Buyers, But They Are Not (Opinion)

There was recently a crypto study in South Korea on Chinese Bitcoin arbitrage traders and the Korean “kimchi bounty” on Bitcoin prices. His characterization of cross-border Bitcoin trade and his recommendations miss some key economic underpinnings.

A recent post cryptographic study by Incheon National University and Bank of Korea makes the rounds. The authors found a strong correlation between the “kimchi premium” and international remittances to China.

‘Kimchi Premium’ is the consistently higher bitcoin price in South Korea

The kimchi bounty is the highest Bitcoin and crypto price in South Korea. This is due to the higher relative demand for bitcoin within the Korean economy compared to fiat payments. This is also the result of the falling supply of BTC.

The authors of the article infer that Chinese arbitrage traders are selling Bitcoin to South Koreans. They suggest it is because Chinese Bitcoin sellers are preying on the kimchi premium. They sell it to South Korean crypto traders specifically to get a higher price.

The authors of the article describe this as Chinese crypto traders taking advantage of Korean crypto traders. They call South Korea a “target” and say Chinese crypto traders are “exploiting excess demand.” Additionally, they are also calling for international cryptocurrency regulatory standards to protect investors.

But Chinese crypto traders are not stealing from South Korean crypto traders. South Korean Bitcoin buyers don’t mind being scammed if that’s what it is. They are willing to pay higher prices to get more Bitcoin.

Chinese meet higher demand

The study comes from the economics department of Incheon National. But the paper itself is not very economical. The author does not seem to consider cross-border bitcoin trading economically.

Higher prices exist specifically to attract more sellers. This is how markets work to coordinate supply and demand. There is not as much bitcoin in South Korea as there are people in the market there would like.

So they are willing to pay a higher price to get more Bitcoin. It’s a free market. It is not exploitation. This is how prizes distribute resources where people want them most in the fair trade-offs we all make.

Chinese traders benefiting from the kimchi premium respond to an incentive. Bitcoin buyers in Korea increase this incentive with their own money. They use the higher price they are willing to pay as BTC bait.

Ironically, the document calls for political intervention. It’s ironic because it’s politics (strict control of Korean capital) that is creating the Bitcoin shortage in South Korea. This shortage of BTC is the cause of the kimchi bounty.

A decrease in government controls on financial markets could be more likely to lower the premium. The mutually beneficial business relationship between Chinese and Korean crypto traders is not exploitation. It’s economics.


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