TLDR:

Successfully identified and capitalized on the "Kimchi Premium" arbitrage opportunity between international cryptocurrency markets, developing proprietary software tools to analyze price differentials. Used calculation systems (luka7, scolkg) that quantified arbitrage opportunities between markets, enabling profitable trades during market inefficiencies.

The Problem

The cryptocurrency market of 2018 presented significant inefficiencies with price disparities between different regional markets, particularly between Asian and Western exchanges:

• Price differences between platforms created arbitrage opportunities but required rapid execution
• Traditional banking systems imposed limitations on quick fund transfers needed for arbitrage
• Regulatory uncertainty around cryptocurrency created compliance challenges
• Technical complexity of securely managing cryptocurrency transactions posed significant barriers
• High volatility in cryptocurrencies made timing critical for profitable operations

The Solution

We developed a multi-faceted approach to capitalize on market inefficiencies:

• Created software tools to track price differences between cryptocurrency platforms in real-time
• Established direct cash-based transaction channels
• Leveraged family networks to pool capital for larger transaction volumes
• Implemented a semi-automated system for monitoring the "Kimchi Premium" between Korean and other markets
• Developed technical infrastructure for secure cryptocurrency transfers between platforms
• Adapted business model from pure trading to software development for crypto arbitrage

The Downfall

Several critical factors ultimately undermined the venture's sustainability:

• Fell victim to sophisticated scams when attempting to secure better rates through Telegram connections
• Lost significant capital sending funds to fraudulent traders in India and Nigeria
• Market volatility accelerated beyond our risk management capabilities when Bitcoin prices began to drop
• Attempted to recover losses through active trading, resulting in further capital depletion
• Made an all-in investment in a Vietnamese crypto project that ultimately failed, eliminating remaining capital
• Market maturation began closing arbitrage windows

Key Lessons

This venture provided invaluable experience in financial markets, technology, and business operations:

1. Mastered fundamental company operations including bookkeeping, accounting, and regulatory compliance
2. Developed non-stop hustling mentality and negotiation skills through high-pressure transactions
3. Gained firsthand experience in identifying and exploiting market inefficiencies
4. Learned critical lessons about counterparty risk and due diligence in unregulated markets
5. Recognized the double-edged nature of volatility—creating both opportunity and existential risk
6. Understood the importance of risk management and capital preservation during market downturns