- CoinMarketCap has removed some South Korean exchanges from its Bitcoin price calculations.
- The removal is only temporary to avoid arbitrage.
Leading cryptocurrency market aggregator, CoinMarketCap, removed most South Korean crypto exchanges from its price calculations. The exchange removal is due to the crypto price premium on most South Korean exchanges.
Particularly, CoinMarketCap has temporarily removed the South Korean exchanges from its Bitcoin price calculations. The aggregator noted that BTC price is currently about 6% higher in South Korea compared to the rest of the world.
The price variance or Kimchi Premium also occurred in 2017 and 2018. Notably, if CoinMarketCap includes the South Korean exchanges it will skew the overall price of BTC. As a result, the skewed price will create room for arbitrage.
To clarify, arbitrage is trading that exploits small price differences of the same or similar assets in different markets. An arbitrage trader can buy low in one market and sell in the other for a higher price.
Thus, CoinMarketCap will only exclude the South Korean exchanges until crypto prices normalize. Fortunately, the Kimchi Premium is temporary. The effect occurs when user demand for cryptos is higher than the exchange supply.
Crypto adoption has been at an all-time high with many companies and institutional investors finally investing in different cryptos. However, as crypto adoption has grown so has the need for clearer regulation. In line with this, South Korea has taken steps to tighten its crypto rules.
As the crypto world and the rest of the world converge it is inevitable that there will be some fallout. However, the market always moves to correct itself and prices should normalize soon.