Bitcoin isn’t ‘frothy’ even with this rally — the ‘Kimchi premium’ helps explain why

This is The Takeaway from today’s Morning Brief, which you can sign up to receive in your inbox every morning along with:

One of the hardest jobs in the business is price targets. As we enter the 2025 outlook season, that becomes exceedingly clear as strategists lay out their cases based on underlying economic growth metrics, corporate projections, probabilities, and experience.

But what if you had almost none of those data points? That’s what the crypto analysts have to do. Without having fundamentals and executive management team outlooks to look at, you’re not left with much more than sentiment — and the challenge to get creative in measuring it.

As our Chart of the Week shows, bitcoin has surged ever higher since the election as demand has risen. It’s been surfing as high as the $99,000 mark as it nears six digits for the first time, thanks to the promise of an executive branch filled with crypto allies — if not believers — who will unlock the next wave of demand.

“Anecdotally, we are seeing renewed interest in crypto from casual observers,” Sean Farrell, Fundstrat’s head of digital asset strategy, wrote in a note to clients this week, noting that “friends and family” are back to asking about crypto.

Once again, we’re at the point in the cycle where the bitcoin conversation is spilling over from more niche financial media to pretty much everybody. And just like the spikes of 2017 and 2021, it’s just in time to be a key topic around the Thanksgiving table. Comparisons that invoke the big question, of course, about whether this is the latest top.

But according to Farrell, “looking beyond social cues to more quantifiable market indicators, the current landscape does not exhibit the frothiness of the March rally or the late 2021 cyclical peak.”

One such “quantifiable” market indicator of sentiment and froth is the difference in price between bitcoin in South Korea and bitcoin on, say, Coinbase — the other component of our Chart of the Week. The crypto industry calls this the “Kimchi Premium” or the “Korea Premium Index,” and it stems from the country’s idiosyncratic capital control laws that prevent arbitrage. If you buy in South Korea, you have to sell it there. (This phenomenon helped inspire Sam Bankman-Fried’s arbitrage play.)

“When speculative fervor commences, we end up seeing a premium on the price of BTC on Korean exchanges relative to other crypto exchanges,” Farrell wrote. “Currently, the premium is around 0%, signaling a lack of overexuberance among Korean traders.”

Usually, he added, the premium surges past 10% if the market is peaking.

This illustrates how complicated reading sentiment and demand actually is. Despite record highs, questions from family and friends, a rise in “buy bitcoin” queries on Google, and Coinbase’s high position in the app store, this premium — as well as various other creative sentiment tools Fundstrat and others use to measure — are far from flashing warning signs. In fact, Farrell says that with the political tailwinds, there’s room to run.

“The past week’s rally should not be dismissed as mere speculative exuberance,” he wrote.

A good talking point for the Thanksgiving table.

Ethan Wolff-Mann is a Senior Editor at Yahoo Finance, running newsletters. Follow him on X @ewolffmann.

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