Should You Buy a Reverse Premium Coin? 3 Things to Check First

When a coin at +1% and a coin at −10% sit side by side in the kimchi premium ranking, the second one looks much cheaper. But before weighing whether to buy a reverse premium coin, you first need to check whether that number really means it is cheap.

What does a −10% reverse premium look like in numbers?

A reverse premium is when the kimchi premium is negative. It means the Korean price is lower than the overseas price converted into won.

Here, the overseas price is the coin's dollar price on an overseas exchange such as Binance. It is multiplied by the KRW/USD exchange rate and compared with the Korean price. The premium is that difference expressed as a percentage (%).

Let us take a hypothetical coin priced at ₩1,000. If its overseas price converted into won is ₩1,000 but it trades at ₩900 in Korea, the premium is (900 ÷ 1,000 − 1) × 100 = −10%.

If you then buy ₩1 million worth at ₩900, you get about 1,111 coins. Valued at the reference price of ₩1,000, that comes to about ₩1.11 million, so on paper it looks cheap. But there are fees too, and above all, it only means something if you can actually sell at that price.

CoinGaja data showed MovieBloc (MBL) at −10.55% as of 11 a.m. KST on October 12. These values keep changing, so it is best to treat a number you see in the kimchi premium ranking only as a starting point.

1. Check for deposit and withdrawal suspensions first

A deposit and withdrawal suspension means the route for moving that coin into or out of the exchange is blocked. It happens for reasons such as maintenance, network problems, an upcoming delisting or wallet problems.

When deposits are blocked, coins cannot come in from abroad, so the Korean price moves on its own. That is why a reverse premium can last a long time. The reverse premium may not be there because the coin is cheap; it may be a gap that appears because the prices in the two markets are not linked.

Check the deposit and withdrawal status on the coin's detail screen in the exchange app. It also helps to check the exchange's notices for a maintenance announcement.

2. Look for trading restrictions or an investment warning label

Exchanges sometimes put labels such as investment warning or investment caution on coins that have problems. If a delisting is possible, a notice usually goes up first.

Even when such coins look cheap, there is often a reason. Before you buy, search the exchange's notices for the coin's name.

3. Look at the overseas price and trading volume together

Sometimes a coin shows a reverse premium because the overseas price spiked for a moment or because a different exchange-rate basis is used. Some sites use the won price of Tether (USDT) instead of the exchange rate, so the values differ slightly from site to site.

Check for yourself whether the price on the overseas exchange is really at that level. You also need to see whether there is enough volume in the Korean order book, the screen where buy and sell orders are stacked up by price. When trading volume is low, buying may be easy, but when you sell, your order can be filled at a lower price than you expected.

A reverse premium is not automatically an opportunity

For a reverse premium to shrink, the Korean price has to rise or the overseas price (converted into won) has to fall, so that the gap between the two prices narrows. The gap also changes when the exchange rate moves.

If deposits and withdrawals are blocked, the flow that would close that gap is weak, so the reverse premium may last a long time.

Only when deposits and withdrawals are open, trading volume is sufficient and there is no special notice can you read that negative figure as a price gap.