Foreign exchange and anti-money laundering rules in South Korea are making it harder for traders in Bitcoin deals. This is according to a complain launched earlier last month by Kimchi Premium. KimChi are the traders who have studied the price gap.
Now, the price of Bitcoin in the country declined so fast. It it was back in line with those on the international market on Friday. This is the first time in the last seven weeks.
The price of Bitcoin was 9,049 at Korbit, one of the cryptocurrency exchanges in South Korea as at the time of this writing. This is compared to a price of $8,654.31 on CoinMarketCap. Therefore, it may be high but not that high as it used to be. Korbit is third largest Bitcoin markets in volume after Bithumb and Coinone.
Bitcoin prices are declining globally. However, the decline in South Korea markets is partly due to pressure from arbitragers. However, the fall also signify declining investor sentiment in the market, which is one of the largest cryptocurrency markets in the world.
Usually, Bitcoin price is higher Korean markets and many arbitragers buy in the international markets to sell in these markets. In fact, they are as high as 43 percent higher than those in the U.S. For instance, the price was about $7,500 higher in January when kimchi premium reached its peak. Now it is difficult to do such transactions in bulk following the new regulations in South Korea.
The number of arbitragers are decreasing in the Korea market too. Genesis Block also noted a decline in the number of people from Hong Kong who used to trade Bitcoin in South Korea. They used to line up every morning at a cryptocurrency ATM operated by Genesis Block Ltd. in Hong Kong’s Wan Chai neighborhood. This happened after the halving of the premium in late January. They could transfer the Bitcoins for exchanges in Korea in order to sell them at a higher fee in the markets.
Volumes have gone down by as much as 85 percent from December highs according to CryptoCompare.com.
The decline also comes after a series of threat from the government about shutting cryptocurrency. Meanwhile, rules aimed at ending anonymity trading (with KYC) came to effect on January 30. That might be the worst blunder ever made in a country that hosts a large number of crypto traders.
“The bubble in crytpocurrencies has burst” in Korea, said Yeol-mae Kim, an analyst at Eugene Investment & Securities Co. in Seoul.
The shifts in prices caused CoinMarketCap.com to exclude Korean exchanges from its price calculations in the first week of January. This caused a further selloff with Bitcoin sinking for more than 10 percent. It is yet to be seen what the effects the new regulations will bring. It is unlikely for kimchi premium to return when prices are falling globally according to Kim.