₩1 Million of MANTRA at a Premium: How Much Is Left If It Shrinks?

If MANTRA (OM) shows up at the top of the kimchi premium rankings, you need to weigh separately what kind of coin it is and how big the markup on its price is. How you rate the coin itself and the premium are two separate things. You can compare the current kimchi premium of many coins on the kimchi premium rankings.

What kind of project is MANTRA?

MANTRA is known as a project focused on bringing real-world assets (RWA) onto the blockchain. Real-world assets are assets that exist in the real world, such as real estate, bonds and artworks. The idea is to turn the rights to such assets into digital certificates called tokens and trade them on the blockchain.

However, a goal and actual usage are two different things. You should also look at token unlocks. An unlock is the schedule on which tokens that were locked up are released onto the market; if a lot is released at once, the amount people want to sell can grow. You can check the schedule and the amounts in the project's official documents.

How is the kimchi premium calculated, and why does it get big?

The kimchi premium is a ratio showing how much more expensive the Korean price is than the overseas price. The formula is (Korean price ÷ (overseas price × KRW/USD exchange rate) − 1) × 100. If the Korean price is 1.03 times the overseas price converted into won, the kimchi premium is +3%.

When buying suddenly floods into a Korean exchange, the sell orders in the order book shrink quickly. The order book is the screen where buy and sell orders are stacked up at each price level. Because it is hard to move freely between the Korean and overseas markets, this price gap does not close right away and can last for a while. The lower a coin's trading volume, the more easily the gap widens.

Following it through with numbers

This is a hypothetical example. Say there is a coin whose overseas price is $1, with an exchange rate of ₩1,338. Its value converted into won is ₩1,338.

• At a kimchi premium of +1%, the Korean price is about ₩1,351. (1,338 × 1.01 = 1,351.38)
• At a kimchi premium of +10%, the Korean price is about ₩1,472. (1,338 × 1.10 = 1,471.8)

If you buy ₩1 million worth at a +10% kimchi premium, you get about 679 coins. (1,000,000 ÷ 1,472 ≈ 679.3) Had you bought at the overseas price with the same money, you would have about 747. (1,000,000 ÷ 1,338 ≈ 747.4)

The numbers look different here because the base is different. A 10% kimchi premium means the Korean price is 10% higher, taking the overseas price as the base. Seen as the number of coins you receive, the same gap means about 9% fewer than at the overseas price. (679 ÷ 747 ≈ 0.909)

Now suppose the overseas price stays the same but the kimchi premium shrinks to 1%. The Korean price becomes about ₩1,351, and selling the 679 coins gives about ₩917,000. (679 × 1,351 ≈ 917,329) The coin's price has not changed, yet you are about ₩83,000 down. A rise in the overseas price would only hide part of this loss; the pressure of the markup draining away is still there.

Extra costs at the fill stage

The kimchi premium on screen is based on the current price. If you buy a large amount with a market order, it fills step by step up through the higher prices in the order book, and you end up paying more than you expected. The difference between the price you expected and the price you were actually filled at is slippage.

For example, even if the premium on screen is +10%, it can be +11% based on your average fill price. The loss you take when the premium returns to a normal level grows by that much as well. For thinly traded coins, it is better to check the sell orders in the order book before you place an order.

Questions to ask yourself before you buy

If the premium is noticeably higher than usual, first sort out whether your reason for buying is the coin's value or the sight of it climbing the rankings. The markup is a cost that can shrink on its own even if the coin's price does not go up.