The top two digital assets by market capitalization are presently trading at a large premium on South Korean exchanges. Bitcoin is selling near $800 higher than the rest of the world and Ether at about $20 more.
When such a premium pops up, traders often arbitrage out the price difference immediately. However, this could be taking longer than usual because of the regulations introduced in 2018 within the country.
Presently, purchasing a whole Bitcoin would cost over $12,600 at most major South Korean exchanges. The Ethereum network’s native asset Ether is performing similarly. At press time, one ETH token in South Korea costs about $20 more than it is around the world. Whereas Ether is currently trading at approximately $305 on the likes of Bitfinex or Coinbase, for instance, it trades at $325 or higher across South Korean exchanges.
Considering the crypto markets’ volatile and fragmented nature, opportunities to profit with minimal risk always appear like this. Traders usually swoop in and take advantage of purchasing low and selling high at the same time—arbitraging. That is not the case with South Korean exchanges though.
A theory about why the price difference is not arbitraged away yet is that the recently-introduced regulations have made it so the pool of potential traders willing to make the necessary trades is way smaller than it was.
To arbitrage trade across digital currency exchanges, an individual needs an account at the exchange with low price and South Korean venue in which such a Bitcoin premium could be seen. New regulations specify that exchange accounts should be created via a bank account owned by the user. The nation’s regulators permitted exchanges and banks working together, providing the former can show robust observation of local AML and KYC regulators. That limits access to the market and price premiums stand a higher chance of being unchecked for longer.
South Korea is seeing significant demand for Bitcoin and other digital assets. Its leading exchange by trading volume, UpBit, witnessed a reported half a billion dollars be traded in the past 24 hours.