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With the won-dollar exchange rate hovering around 1,555 won per dollar, the price of the dollar stablecoin Tether (USDT) on domestic cryptocurrency exchanges has remained around 1,510 won. In theory, 1 USDT equals 1 dollar, but as the exchange rate surged in a short period while liquidity on domestic crypto exchanges failed to keep pace, a price gap has emerged. Typically, when the exchange rate rises, demand for dollar stablecoins concentrates and domestic prices climb higher, but with the market recently contracting and coin demand falling, the opposite phenomenon is occurring.
According to Upbit, the nation's largest cryptocurrency exchange, on the 8th the Upbit USDT premium briefly exceeded -3% in the morning, marking the steepest negative premium in the past two years. A negative USDT premium means domestic exchange prices are lower than global prices.
As the won-dollar exchange rate fell to the 1,540 won range as of 1:20 p.m. that day, the negative premium narrowed to around -2.3%, but the gap with global prices persists. The USDT price on both Upbit and Bithumb remained around 1,510 won, trading more than 30 won below the global average USDT price.
USDT is a stablecoin pegged one-to-one to the dollar. Currently, USDT maintains a global average price of around 1 dollar according to CoinMarketCap, a cryptocurrency market tracking site.
The problem is the liquidity of domestic exchanges. When the won-dollar exchange rate suddenly surges and liquidity is insufficient, cases arise where prices fail to keep up. During the emergency martial law incident in December 2024, the won-dollar exchange rate also surged, widening the USDT negative premium on domestic exchanges.
On top of this, deteriorating supply and demand in the cryptocurrency market played a part. When the won-dollar exchange rate rises, buying demand should flow in accordingly, but reality has not followed suit. A Bithumb official said, "Normally, in a strong-dollar phase, demand to accumulate dollar-pegged stablecoins rather than buy dollars directly concentrates, so USDT often carried a premium," adding, "Recently, this demand has failed to keep pace with the rate of exchange-rate increase, which appears to have temporarily produced a negative premium."
In fact, stablecoins are often traded at prices higher than the exchange rate because their procedures are simpler than bank currency exchange, they can be traded 24 hours a day, and fee burdens are smaller. In February of this year, when the won-dollar exchange rate continued to rise, the Upbit USDT premium reached the 3% range.
However, with the domestic cryptocurrency market's trading slump deepening recently, the situation has changed. As the KOSPI's upward trend continued, individual investor funds shifted to the stock market, and ahead of the cryptocurrency taxation set to take effect next year, the inflow of new investors has also slowed. Major domestic cryptocurrency exchanges have seen revenue fall by more than half due to the sharp drop in trading volume in the first quarter.
Kim Min-seung, head of the Korbit Research Center, diagnosed, "The occurrence of a 'kimchi premium' (where domestic prices form higher than global prices) or a negative premium itself may be a temporary phenomenon driven by a surge in the exchange rate, but if such price gaps persist over a long period, it can be interpreted as a signal of market downturn or capital flight."
Even if domestic buying demand is insufficient, if low-price buying aimed at arbitrage flows in actively, prices can be corrected relatively quickly. However, analysts say that this price-correction function is also failing to operate smoothly in the domestic cryptocurrency market. This is because the structure makes arbitrage difficult, with various constraints such as real-name accounts, remittance procedures, and costs from capital movement involved in bringing overseas funds back into the country to buy USDT.
In addition, the absence of market makers (MMs) in the domestic market is prolonging the negative premium phenomenon. Market makers trade simultaneously on domestic and overseas exchanges and reduce price gaps through arbitrage, but no related system has yet been established in Korea. Kim said, "In Korea, market makers are not officially recognized, and trading by individual traders who have effectively served as market makers has also greatly decreased," adding, "Even when price differences arise between domestic and overseas markets, there is a shortage of entities to quickly resolve them."
