Crypto's Kimchi Premium

­Even to the most casual observer, cryptocurrency is noticeably on the trading radar. But not everyone knows what cryptocurrency is or its application beyond a digital currency. For those who have a budding interest, we talked to two people who dabble in the crypto scene in Korea, where crypto is becoming a full-fledged and regulated industry. Here, Bitcoin sometimes trades at prices above the rest of the market, leading to the creation of the term “Kimchi premium,” and the proliferation of video games has given rise to crypto purchases in the metaverse.

Raymond Ahn, a CEO at an international growth marketing agency, is a collector, investor and founder in web3 communities. Michael Kim is a project manager who helps build metaverse-like virtual reality gaming platforms for gaming; his company works with blockchain platform ONBUFF.

Ahn and Kim shared their opinions of cryptocurrency, blockchain and non-fungible tokens (NFTs), why they invest, and what they think about crypto’s future.

Archie: How did you both get into the crypto space?

Ray: I got into cryptocurrency about three years ago, but I took it more seriously when the [crypto-based collectible] NFT craze happened. Before I got into it, I had trader friends who bought [crypto-based currency] Bitcoin, when the overall value of Bitcoin was under $1,000 or even $500. I started buying coins and they just started going up, so I started trading and building NFT communities. I have an NFT chat on Telegram, which is a crypto chat to advise and strategize crypto with fellow investors.

Michael: Actually, I was never that interested in cryptocurrency. I was more interested in investments on [digital ledger that enables crypto transactions] blockchain because I’ve always been quite skeptical about cryptocurrency. I thought cryptocurrency would collapse as soon as possible because it’s literally just currency. But I love blockchain, and I work in this field designing and making products like web3 social media with blockchain technology.

Archie: How is the crypto boom in Korea fueling interest from non-traders?

Ray: A lot of the people in South Korea are interested in crypto and many invest. Trading crypto lets Koreans double or triple what their average salary is. There’s also a huge metaverse trading market: [Ethereum-based decentralized gaming studio that builds play-to-earn NFT games] Gala Games launched founder nodes, or tokens, very early on. You can use the tokens for items, you get rewarded, and you can earn money in a way like game-asset ownership. Korea has a big gaming influence; a lot of people are gamers here so crypto and trading interest have risen in the gaming community.

Michael: Koreans love crypto! In Korea, many people invest, but they usually don't want to use crypto as currency. [One of the largest cryptocurrency exchanges in South Korea] Upbit is one of the biggest spaces where people in Korea invest. The shares of Korean consumers are approximately 85%. I would say that around 40% to 50% of Koreans invest because they want to earn money with investments, but not by using, trading or making a project with Blockchain technology.

At the moment, social media and games are the top topics in the cryptocurrency space in Korea. Gstar is a big event and exhibition in Korea, where all the gaming companies go to announce new games, new purchases or what they're going to make. This year, people from different crypto spaces like Polygon are attending to collaborate with game companies. It’s a big movement for cryptocurrency.

Archie: Do you think people find it hard to be positive towards cryptocurrency after the market crashing last year?

Ray: Definitely. Here in Korea, we had a collapse of LUNA, a native cryptocurrency of Terra Blockchain platform. It was the second largest exchange crash, and over $2 billion just vanished with hundreds of millions of dollars just liquidated, so it built a lot of fear and uncertainty about the market. I think it's uncertain, but it's also like the teenage stages of NFTs and crypto, where they're having growing pains. Some projects won't make it, but that doesn't mean that the whole space won’t make it. People are still figuring out how to navigate the space and people will learn and improve and adapt.

Archie: How can a casual observer begin to learn about crypto?

Ray: It’s not a regulated system so it's not embedded in day-to-day uses yet as such, so an average consumer wouldn’t need to be familiar with it yet unless it's their interest. I'd say for the consumer that is interested, they should invest one to three hours a day just to learn cryptocurrency, such as reading on Twitter, Substack, watching on YouTube. Then they can become familiar with it reasonably quickly. But realistically, they need to explore the things they’re curious about. Without the research, it’s probably unlikely that the average consumer will learn enough right now. There’s exposure but there isn’t enough integrated exposure yet.

Michael: Let's face it, they don’t need to. I tell it like this, I have many friends who are interested in learning more about cryptocurrency, and they ask, “How can I know about cryptocurrency?” I always answer by saying, “If you lose your money, you know about cryptocurrency well.”

Archie: When do you think crypto will become mainstream?

CRYPTO 101

Get started on your crypto journey with these resources.

For learners: To learn more in the world of cryptocurrency, our experts advise following accounts on Twitter: Veve, Kingz, Gala Games, as well as learning the different types of cryptocurrency: Ethereum, Polygon, Bitcoin and Binance. For gamers: There are different types of metaverse platforms for gamers to play, trade, buy and sell in the virtual universe. Platforms to know in 2023 are; Sorare, The Sandbox, Axie Infinity, Bondee, Roblox, and Metahero.

Ray: Crypto has been around for 10 years or so now. I think in the next 10 years, we’ll definitely see more widespread adoption. Already it has gone from nobody knowing about it, to billions and potentially trillions pouring into this market. If you look at the market cap of Bitcoin and Ethereum, it's already in the billions.

Archie: Can you give us an example of how crypto can make life easier?

Ray: I recently went to Taipei Blockchain Week in Taiwan, and they had everyone buy tickets online through an app called Moongate, which turned out to be a cryptocurrency-based app, and it functions as an NFT ticket-gating tool. When attendees bought their tickets, they didn't know they were buying an NFT and Moongate made the transaction very seamless. I think in the future, when you're buying something and you don't even know that you're buying an NFT, it's going to be the way to onboard users. These kinds of developments will likely integrate cryptocurrency in apps such as NFT’s for events, festivals or concerts. Another development is the use of crypto credit cards, or coin-based cards. I have one and I can use it in stores, shops and restaurants. It’s almost like a Visa card because they now have a partnership with Visa.

Archie: What do traditional financial institutions—or government central bank entities—fear as the most ‘disruptive’ elements of the growing crypto space? 

Ray: They fear the loss of control. For example, if people started using crypto instead of the bank, then the money flow will disappear, not to them, but to the crypto scene where people have full control of their money and the banks don't get a cut of that. That's also why they're producing central bank digital currencies (CBDCs), which are set to roll out this year. I believe China already has their CBDCs, and Korea has theirs, but I think they're just waiting for the United States to launch their version and others will follow. But everything we do, with the whole supply of money in the world, is mainly digital. I think crypto is just the next evolution of how we handle payments. We already use credit cards and digital banking; this is the next wave of how we're going to transact with money. The only thing holding crypto back right now is that there needs to be some sort of regulation. Without regulation, it’s just too dangerous to get into. So many people lost all their life savings in the crash, and it was all because there was no regulation in place.

Michael: I was working in investment banking in Korea before cryptocurrency so I know traditional  financial institutions very well. We were very interested in crypto but we didn’t have any fears of the growing crypto space. I think our currency and banking system is too strong and efficient to have mixed money, and crypto just isn’t sustainable. I can’t see any pure cryptocurrency growing and overtaking the future of banking here in Korea anytime soon.

Archie: What is the best area of crypto to be investing in today?

Ray: I would say anything related to AI, and that's more likely in the metaverse or among NFTs. To even play in the Metaverse or operate there, you need to use crypto: people are trading and investing so much within the Metaverse. People are also investing in projects that have more infrastructure and provide tools or services. There’s a big interest in areas that use blockchain technology and things that integrate web3 and cryptocurrency more seamlessly.

Michael: I think games and the metaverse. We spend a lot of money in the game. We can buy an item or a car in the game and convert it into an NFT, so you can claim that you have ownership of your item. Though we can use blockchain technology to make purchases or to move money, the metaverse is a popular place for people to put their money into. And one game can have their own economic system so the rates can vary for trading and making money.

Archie: Parting words: Why do we need crypto and NFTs when we could live without them?

Ray: The future is digitalization of money, and crypto is the next evolution of how we will do transactions with money. With the incoming of CBDCs it will be easier to track and monitor people using their digital currencies.

Michael: We can live without any tech, but everything is more convenient with tech. For example, when the Internet (Web2) came out, everyone said it’s nonsense and we don’t need it. And at the time, it was very slow, inconvenient and also expensive, so it felt unnecessary. But now everyone uses the Internet and we can not live without it. It was all a result of rapid development and accompanied education leading to the change. It’s the same for crypto and NFT. For now, we don’t need to use them, but maybe for the next generation, it could be essential for their lives. I believe someday these technologies can lead to [a new age of crypto called] “decentralized gen.” That’s why I struggle in this field, because I want the next evolution.

Editor’s note: Visa and Mastercard have announced pausing their crypto investments in the wake of recent meltdowns.