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Traders Actively Taking Advantage Of Arbitrage Opportunities In Korea

Traders from all over the world are taking advantage of the arbitrage opportunities in countries like Korea, where cryptocurrencies are sold at a premium price compared to other countries. This makes reselling coins effective and lucrative businesses that have regulators eyeing possible solutions for this fact, according to an article published by Nikkei Asian Review.
To understand why is this a problem, we must first understand what arbitrage means in this context. Investopedia defines arbitrage as “the simultaneous purchase and sale of an asset to profit from an imbalance in the price”. So for an arbitrage to even be possible there must be imbalances in prices first. And that is why the cryptocurrency market is filled with arbitrage opportunities: by the decentralized trait of its operations.
In the stock market, every stock can have a single price at a time; but in the cryptocurrency market, every crypto asset has different prices in a range that varies from country to country and even between exchanges. That is why bitcoin price is called a spread: a value in the middle of a range of values. And investors have noticed that and have started profiting from this fact.
Several investments firms have created automatized programs to leverage this fact and turn it into profit; there is an estimate of hundreds of thousands of yens of profit every day only by passing cryptocurrencies from Japan to Korea. But not much can be done to fix this; like the concept says, it is a result of market imbalances. But what is called the “Kimchi Premium” (the price imbalance between Korean exchanges and international ones) is unlikely to cease to exist.
Korea is a country that is heavily invested in cryptocurrencies, and the demand is such that people disregard the premium prices to buy crypto. A potential workaround could be collecting exit fees, but that also could affect common traders. Until the cryptocurrency market becomes a more integrated place, this will keep happening.

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