Mechanism

Market premium is not a simple mismatch of supply and demand; it is a structural price divergence created by the interaction of institutional constraints, liquidity configuration, and investor psychology. In Korea, these features are particularly pronounced. The main drivers can be grouped as follows.

2.1 Institutional Factors

Korea maintains a partially open capital account, and there are legal constraints on overseas remittances and FX transactions for retail investors. Under the Foreign Exchange Transactions Act and supervisory regulations, domestic residents face practical barriers to trading directly on offshore exchanges or conducting cross-border arbitrage. These capital frictions restrict the flow of funds with global markets, so external price signals are not transmitted to the local market immediately. As a result, even when offshore prices fall, residual domestic demand can keep local prices relatively elevated.

2.2 Market-Structural Factors

The Korean crypto market is centered on KRW-denominated venues, with liquidity concentrated in a few centralized exchanges (e.g., Upbit, Bithumb). This concentration weakens liquidity linkage with USD markets and reduces the market’s self-correcting capacity. In uptrends, domestic buying often clusters in a short window, and with limited market depth, price discovery becomes locally detached from the global average, causing the premium to persist structurally.

2.3 Behavioral Factors

Korean investors tend to exhibit higher risk appetite and a focus on short-term returns. Given regulations and entry barriers in traditional markets (e.g., real estate, equities), crypto is often perceived as a more accessible alternative. During periods of FX appreciation (USD strength vs. KRW), inflation, or macro uncertainty, crypto can also be viewed as a substitute store of value. These behavioral dynamics amplify buy-side pressure in bull phases and can overheat local demand, widening the market premium.

These factors form a feedback loop that can sustain—or even intensify—the premium state over time.