Bitcoin price has surpassed $12,000 in both South Korea and Japan, two major bitcoin markets that are accountable for approximately 74 percent of global bitcoin trades.
In South Korea, bitcoin is being traded with a premium of over $1,270, a 12 percent premium rate. While it is not as high as the rates provided by bitcoin-based exchange-traded notes (ETNs) or regulated bitcoin instruments such as Grayscale Investment’s GTBC, it is still significantly more expensive to acquire bitcoin in Japan and South Korea.
At its peak, bitcoin achieved an all-time high price in South Korea at $12,653, as the global average bitcoin price neared the $11,000 mark.
Traders in South Korea still invest in bitcoin with a high premium despite South Korea being the third largest bitcoin market because the supply of bitcoin from the local market is low and the demand has increased at an exponential rate over the past few months.
In South Korea, especially within the traditional finance sector, once the demand for a particular asset reaches a certain threshold, the entire sector seeks to acquire the asset, following the trend.
As Tony Lyu, the founder and CEO of South Korea’s third largest cryptocurrency exchange Korbit, which was acquired by $10 billion gaming company Nexon at $140 million valuation, stated:
“Word just spreads really fast in Korea. Once people are invested, they want everyone else to join the party. There’s been this huge, almost a community movement around this,” said Lyu.
More to that, Jeff Paik, the founder of Finector, a Seoul-based research firm, told Nathaniel Poppers of the New York Times in an interview that investors from the traditional finance industry is leading the bitcoin market in South Korea, not technology enthusiasts and young traders.
While the premium rate in Japan is not as high as South Korea, it still significanlty higher than that of other major regions such as the US.
At the time of reporting, bitcoin is being traded at over $11,500 in Japan, approximately $1,000 higher than that of the global bitcoin average price.
According to several cryptocurrency market data providers including CryptoCompare, the Japanese bitcoin exchange market accounts for 64 percent of global bitcoin trades, nearly twice as large as the US. However, the global average bitcoin price is often similar to the exchange rate in the US, and the price of bitcoin in Japan is often 5 to 8 percent higher than that of the US.
As the largest bitcoin exchange market, Japan has to have the most liquidity and therefore, supply of bitcoin. Hence, there should not be a high premium of 5 to 8 percent amidst strong rallies, because as the largest market, it should have sufficient liquidity and supply to address the growing demand from investors.
For many years, analysts have questioned the zero-fee trading platforms of Japan, and the possibility of wash or bot trading. It is likely that similar to China, trading volumes in Japan are inflated, given its abnormal premium rates.