Cryptocurrency index excludes Korean prices
“This morning we excluded some Korean exchanges in price calculations due to the extreme divergence in prices from the rest of the world and limited arbitrage opportunity,” said CoinMarketCap, one of the leading cryptocurrency data providers in the world, on its Twitter page. “We are working on better tools to provide users with the averages that are most relevant to them.”
CoinMarketCap posted the notification on Monday morning, local time, although they actually removed the bitcoin prices from three Korean exchanges - Bithumb, Coinone and Korbit - on Sunday morning, according to local reports.
“The unannounced move to remove data from Bithumb, Coinone and Korbit from its average calculations sparked confusion given that its front-page suggests a broad decline in the cryptocurrency market, including what appeared to be a near-30 percent fall in the price of XRP, [Ripple]” reported CoinDesk, a cryptocurrency news provider.
The price chart at CoinMarketCap showed that the global average price of bitcoin reached $17,653.10 on the evening of Jan. 6. In Korea, the price of bitcoin provided by Bithumb stood at around 25 million won ($23,500) during the same period. The global bitcoin price began falling on the morning of Jan. 7, dropping as low as $16,878 by 7 a.m, UTC. It fell as low as $14,208 on Monday.
“Most people and sources use coinmarketcap.com API to pull price information,” said Simon Yu, CEO of Seattle-based blockchain start-up StormX. “But the issue [with the drop from Jan. 7 to Jan. 8] was it happened without any warning. As every cryptocurrency was down more than 30 percent people started to panic and started to sell off.”
While global investors were in panic mode, the incident brought about the problem with the so-called “Kimchi Premium.”
“Too much demand in Korea and capital controls make it extremely difficult to move money [cryptocurrency] internationally,” explained Yu when asked about why there is a premium in the Korean market.
Officials in Korea, who are trying to clamp down on cryptocurrency trading here, have been citing the “Kimchi Premium” as one of the main reasons for their regulatory policy.
“The reason why we call it speculation is because of the ‘Kimchi Premium,” said Choi Hoon, a director-general of the bank and insurance bureau at the Financial Services Commission, on Monday. “There is a large gap between the price in Korea and the global average, which leads us to think that the market here is overheated.”
“We cannot let Korea lead such ‘irregular’ trading dynamics,” said Choi Jong-ku, the chairman of the Financial Services Commission.
Meanwhile, the country’s central bank will create a new division dedicated to researching cryptocurrencies by the end of January. The team will study the impact digital currency has on the country’s financial system.
BY CHOI HYUNG-JO, PARK EUN-JEE [email@example.com]