What Is the Kimchi Premium? Meaning, Arbitrage, "Ttari," and How to Make Money

Hello, this is Bitpunk. Today we're going to look at kimchi premium (kimp) arbitrage. Through this post and the YouTube video below, you can learn what the kimchi premium is and how to actually use it for arbitrage trading.

What is the kimchi premium?

The kimchi premium refers to a situation where the same cryptocurrency trades at a higher price on Korean exchanges than on overseas exchanges. In other words, the kimchi premium is when a cryptocurrency like Bitcoin sells at a higher, premium price on Korean exchanges compared with overseas trading.

What does "kimchi premium" mean?

But why is it called the kimchi premium? Here is what the name really means. "Kimchi" is also a somewhat derogatory term for Koreans. Just as Koreans sometimes call Chinese people "Jjajang" and Americans "Burger," it's an expression used to lightly tease Koreans. In other words, the fact that Korean exchanges carry a premium is described by comparing it to Korea's signature food, hence the name kimchi premium.

Why does the kimchi premium occur?

So why does the kimchi premium occur? It's because many people on Korean exchanges are willing to buy virtual assets like Bitcoin or Ethereum at higher prices.

Wait, why would anyone pay more for the same asset? There can be many reasons, but so far, depositing Korean won into a domestic exchange is the fastest and easiest way to buy virtual assets.

In other words, because depositing dollars into an overseas exchange to buy is a hassle, a premium temporarily appears. On the other hand, this kimchi premium can also be seen as an indicator of an overheated market.

How can you arbitrage the kimchi premium?

If the same asset is priced higher in one place, the market is inefficient, so we can profit through arbitrage. That is, by buying coins on an overseas exchange and selling them on the Korean market, you can earn a profit equal to the kimchi premium.

The method is simple. Buy the asset on an overseas exchange like Binance and sell it on an exchange like Upbit. The key is that you need to already hold a stablecoin such as Tether on Binance before the kimchi premium appears.

In other words, kimchi premium arbitrage is only possible if you already hold assets like USDT on an overseas exchange such as Binance. This means that if you keep a certain amount of assets on Binance later, when the premium drops or disappears, you'll be able to arbitrage when a kimchi premium appears.

Arbitrage using the kimchi premium is also called spread trading, kimp trading, or "(bo)ttari." All of these aim to capture profit from the premium, and in practice they all mean the same thing.

How do you do kimchi premium arbitrage?

Kimchi premium arbitrage can be done in two ways. The first is to simply transfer the coins and sell them, without hedging in futures trading. This is the simplest way to attempt kimchi premium arbitrage.

If the coin price keeps rising during the transfer, you can earn an extra profit. But conversely, if the coin price falls, you may incur an additional loss.

The second method is to hedge the coin's price movement with a short position. For example, if you buy 1 BTC on Binance spot, you enter a 100 BTC short in futures trading at (almost) the same time. This way, regardless of BTC's price movement, you pay only the trading fees and can make money through kimchi premium arbitrage.

Curious about a more detailed, hands-on method for kimchi premium arbitrage? You can see it in detail in the YouTube video below. If anything in this post so far was hard to follow, check out the video below to see how kimp trading works in practice.