CryptoQuant’s recent analysis points to an interesting trend in the crypto market, specifically the overheating of the Korean premium.
The high values of the Korean premium are interpreted by the on-chain intelligence firm as a potential indicator of strong buying pressure from Korean retail investors.
While a high Korean premium might be interpreted as a sign of bullish sentiment, this index is also frequently used to identify potential price tops.
Overheated Korean Bitcoin Market
The Korea Premium Index (KPI) holds significant importance as a key indicator for tracking changes in the cryptocurrency landscape. This index, gauging the ‘Kimchi Premium,’ offers valuable perspectives into market sentiment within South Korea, a notably active player in the global cryptocurrency markets.
A higher KPI signals a bullish sentiment, indicating increased buying pressure that drives crypto prices higher on South Korean exchanges compared to international platforms. On the other hand, a lower KPI reflects a bearish market sentiment, suggesting diminished buying pressure and the potential for heightened selling activity.
However, it is also important to understand that the Korea Premium Index is also used to identify price tops. CryptoQuant detailed that this is done with the help of two key factors: immediate access to cash for coin purchases on exchanges by Koreans and the prevalent Fear of Missing Out (FOMO) hype in the market.
Notably, the current 14-day moving average for the Korean Premium Index mirrors the levels observed during the peak of the Bitcoin price cycle in the fourth quarter of 2021. This historical parallel raises questions about whether the current market conditions could lead to a similar outcome.
“We are very curious to see if the Korean Premium Index will provide important clues to price tops this time too.”
South Korean Traders Spark Surge in Volume
South Korea has emerged as one of the most important contributors to the unexpected surge in digital asset market volume in the latter part of the year. In November alone, their market share surged to approximately 13%, representing a substantial leap from the 5.2% recorded at the beginning of the year in January.
Chung Hochan, the Head of Marketing at CryptoQuant, attributed it to the notable absence of a futures market catering to retail investors in South Korea. This absence has spurred retail investors in the country to actively explore significant leverage opportunities within the crypto market, with a particular focus on altcoins.
The heightened interest and engagement in altcoins, fueled by the absence of futures trading options, have played a pivotal role in the remarkable expansion of the altcoin market, setting it apart from other traditional investment assets.