Arbitraging the KimChi premium with Bitcoin

Abstract

The almost meteoric rise of Bitcoin has brought with it an investment boom in cryptocurrencies. The cryptocurrency markets however, are not functioning entirely as one would expect. Markets seem to have mispriced assets on a scale that would not happen in the stock market. Perhaps the most notable of these phenomena is the KimChi Premium or the relative overvaluing of bitcoins in Korea when compared to international markets \n \nThe aim of the study will be to establish whether or not the KimChi premium exists, what is the scale of the premium and give some clues to why the premium has come about. \n \nThe first chapter is an introduction to the subject, where the subject is outlined. \n \nThen chapters 2-4 will explain the key ideas and concepts to understand the phenomena being examined as well as giving a backdrop against which the KimChi premium can be assessed. The chapters 2,3 and 4 seek to explain the price setting mechanisms, foreign exchange policy and Bitcoin as a larger phenomenon respectively. \n \nChapters 5-6 are the research and conclusion chapters where the data collected is assessed and analyzed and conclusions are drawn.