Bitcoin’s Brutal Week Is Even Worse in South Korea

The deepening selloff in cryptocurrencies has just claimed another victim: Bitcoin’s kimchi premium.

Prices for the virtual currency in South Korea have tumbled back in line with those on overseas exchanges for the first time in seven weeks, erasing a gap that had swelled to 51 percent in early January. The premium had been so persistent — and so unique among major markets — that traders named it after Korea’s staple side dish.

While its disappearance is partly explained by selling pressure from arbitragers, it also shows how dramatically investor sentiment has deteriorated in what used to be ground zero for the global crypto-mania.

Bitcoin has dropped more than 60 percent from its January high in Korea after the nation’s regulators took several steps to restrict trading and said they’re mulling an outright ban on cryptocurrency exchanges. The country has been on the forefront of a global push by policy makers to rein in the frenzy surrounding digital assets amid concerns over excessive speculation, money laundering, tax evasion and fraud.

“The bubble in cryptocurrencies has burst” in Korea, said Yeol-mae Kim, an analyst at Eugene Investment & Securities Co. in Seoul.

Read more: Making Sense of Bitcoin and Its Wild Price Ride

Bitcoin traded at about 8.7 million won ($8,080) in Korea on Friday, according to a CryptoCompare.com index tracking the country’s major exchanges. That compared with the $8,311 composite price on Bloomberg, which is derived from venues including Bitstamp and Coinbase’s GDAX exchange. Both values were at their lowest levels of the year.

When the kimchi premium reached its peak in January, Bitcoin traded at the equivalent of $22,525 in Korea — about $7,500 higher than the composite price at the time.

The spread began shrinking as fears of a regulatory clampdown escalated. Selling by arbitragers — who have been buying Bitcoin on international venues to offload at a higher price in Korea — also played a role, although the country’s capital controls and anti-money-laundering rules made it difficult to execute such transactions in bulk.

The country’s waning frenzy has been reflected in declining activity on domestic exchanges. Data compiled by CryptoCompare.com show that volumes have dropped by about 85 percent from December highs…

Read Full: Bitcoin’s Brutal Week Is Even Worse in South Korea