Key Points

The kimchi premium is likely the price difference for cryptocurrencies, especially Bitcoin, between South Korean and global exchanges, often creating arbitrage opportunities.
Research suggests Three Arrows Capital, Alameda Research (linked to FTX), and BXB Capital were founded or significantly involved in exploiting the kimchi premium for early profits.
Top articles explaining it include Investopedia Overview, WallStreetMojo Examples, and Corporate Finance History.
The evidence leans toward these companies using the kimchi premium, but details on founding specifics may vary, reflecting the complex crypto market.

What is the Kimchi Premium?

The kimchi premium refers to the price difference where cryptocurrencies, particularly Bitcoin, are often more expensive on South Korean exchanges compared to global ones. This gap, named after the Korean dish kimchi, creates opportunities for arbitrage, where traders buy low on international exchanges and sell high in South Korea. However, South Korea's capital controls and regulations make it challenging to profit from this, as moving money in and out can be restricted.

Recommended Articles

For a clear understanding, check out these articles:

Investopedia Overview for a broad explanation.
WallStreetMojo Examples for charts and practical examples.
Corporate Finance History for historical context and restrictions.
For deeper insight, see the academic paper Bitcoin Microstructure, analyzing market dynamics.

Companies Involved It seems likely that Three Arrows Capital, Alameda Research (tied to FTX), and BXB Capital started by making money from the kimchi premium. Alameda Research, founded in 2017 by Sam Bankman-Fried, directly used this strategy, contributing to FTX's growth. Three Arrows Capital, while founded earlier in 2012, shifted to crypto in 2017 and likely engaged in kimchi premium trading. BXB Capital, also starting in 2017, focused on arbitrage across Korean and American markets, likely including this premium. This reflects an unexpected detail: the kimchi premium not only fueled individual trades but also helped launch major crypto firms, showing its broader impact.

Survey Note: Comprehensive Analysis of the Kimchi Premium and Related Companies

The kimchi premium, a fascinating phenomenon in the cryptocurrency market, refers to the price disparity where cryptocurrencies, especially Bitcoin, are priced higher on South Korean exchanges compared to global counterparts. This term, inspired by the popular Korean fermented cabbage dish kimchi, highlights a unique arbitrage opportunity driven by local demand and regulatory constraints. The premium has been notable since at least 2017, with price differences reaching as high as 50% at times, as evidenced by various financial analyses.

Understanding the Kimchi Premium

The kimchi premium arises due to several factors, including South Korea's capital controls, which limit the flow of foreign currency, and high local demand for cryptocurrencies. This demand is fueled by a tech-savvy population and limited high-return investment options domestically. For instance, Bitcoin might trade at $10,000 on global exchanges like Binance, but reach $15,000 on South Korean platforms like Upbit, creating a lucrative but challenging arbitrage opportunity. The challenge lies in South Korea's financial regulations, which make moving funds in and out difficult, often requiring strict reporting and limiting daily transactions. Historical data, such as from Corporate Finance Institute, shows the premium's significance, with prices noticeably higher in South Korea compared to Western and Asian nations, stimulating crypto trading. This phenomenon, first widely discussed in 2016, has been analyzed in academic papers like Bitcoin Microstructure and the Kimchi Premium, which explores market inefficiencies and arbitrage limits.

Companies Founded or Involved Based on the Kimchi Premium

The kimchi premium has not only been a trading opportunity but also a foundation for several crypto companies. Research suggests that Three Arrows Capital, Alameda Research (linked to FTX), and BXB Capital were significantly involved, with some founded directly on exploiting this premium.

Alameda Research: Founded in 2017 by Sam Bankman-Fried, Alameda Research capitalized on crypto arbitrage, including the kimchi premium. An article from Medium - VegaX Holdings details how SBF used the premium, with Bitcoin at $10,000 in the U.S. versus $15,000 in South Korea, contributing to the firm's success and FTX's later growth, which raised $900 million in 2021.
Three Arrows Capital (3AC): Established in 2012 by Kyle Davies and Su Zhu, 3AC initially focused on foreign-exchange derivatives but shifted to cryptocurrencies in 2017, aligning with the kimchi premium's peak. Fortune Crypto notes 3AC's involvement in kimchi premium trading, making it a strategy they adopted upon entering the crypto space, though not necessarily the founding basis.
BXB Capital: Founded in early 2017, BXB Capital's "About Us" page (BXB Capital) states their initial focus was crypto arbitrage and proprietary trading across Korean-American markets, likely including the kimchi premium. This aligns with Fortune Crypto, confirming their start in this strategy, similar to Alameda and 3AC.

Other potential firms, such as those mentioned in CoinDesk, include "many arbitrage hedge funds" operating on Korean and non-Korean exchanges, but specific names beyond these three are less documented. Investigations, like those reported by Decrypt, involved banks like Woori Bank and Shinhan Bank in illegal remittances, but these are not crypto firms founded on the premium.

Comparative Analysis

To organize the findings, consider the following table comparing these companies: Company

Founded

Initial Strategy

Kimchi Premium Involvement

Notes

Alameda Research

2017

Crypto arbitrage, including kimchi premium

Direct and foundational

Led to FTX's growth, raised $900M in 2021, per Medium - VegaX Three Arrows Capital

2012

Foreign-exchange derivatives, shifted to crypto in 2017

Adopted in crypto phase

Shifted strategy in 2017, per Fortune Crypto BXB Capital

2017

Crypto arbitrage across Korean-American markets

Likely foundational

Confirmed start in arbitrage, per BXB Capital and Fortune Crypto

This table highlights the timeline and strategies, showing how the kimchi premium was a significant factor, especially for firms founded in 2017, aligning with its peak.

Broader Implications and Unexpected Details

An unexpected detail is the kimchi premium's role in launching not just trading firms but also influencing major exchanges and regulatory landscapes, as seen in investigations into banks. This reflects a broader impact, with the premium not only fueling individual profits but also shaping the crypto ecosystem in South Korea, as noted in Bloomberg. The controversy around its legality, with probes into illegal remittances, adds complexity, suggesting a nuanced regulatory environment that both enabled and challenged these firms. In conclusion, the kimchi premium is a key arbitrage opportunity that likely helped found Alameda Research, Three Arrows Capital (in its crypto phase), and BXB Capital, with detailed insights available in the recommended articles and academic papers. This analysis, as of March 27, 2025, provides a comprehensive view, acknowledging the dynamic and sometimes controversial nature of crypto markets.

Key Citations

Investopedia Kimchi Premium: A Crypto Investor's Overview

WallStreetMojo Kimchi Premium - What Is It, Explained, Chart, Examples

Corporate Finance Institute Kimchi Premium - Overview, History, Example, & Restrictions

Bitcoin Microstructure and the Kimchi Premium Academic Paper

Fortune Crypto Veteran crypto traders raising 1,000 Bitcoin for BTC-denominated fund

Decrypt South Korean Authorities Launch Probe Into Bitcoin’s ‘Kimchi Premium’

Medium - VegaX Holdings How SBF Used The Kimchi Premium And Other Crypto Arbitrage Techniques

BXB Capital About Us Page

Bloomberg South Korea Crypto Boom: What is the Kimchi Premium?

What is the Kimchi Premium?

Key Points