According to data from CryptoQuant, Bitcoin’s (BTC) Kimchi Premium has surged to a three-year high of 12%. This spike comes amid a steep decline in the flagship cryptocurrency, triggered by concerns over the economic impact of looming US trade tariffs on Canada, Mexico, and China.

Kimchi Premium Rises To 3-Year High, What’s Driving It?

Starting February 4, US President Donald Trump is set to impose 25% tariffs on Canada and Mexico, while China will face an additional 10% tariff on top of the existing levies. In response, the crypto market has experienced a sharp downturn, with its total market cap plummeting from $3.7 trillion on January 30 to $3.1 trillion at the time of writing.

Amid this market decline, Bitcoin’s Kimchi Premium has surged to a three-year high. Typically, the Kimchi Premium increases when demand for BTC rises significantly in South Korea. However, this time, the surge is occurring during a Bitcoin downturn rather than an uptrend, suggesting other underlying market forces at play.

In a post on X, CryptoQuant CEO Ki Young Ju highlighted that the current Kimchi Premium surge is not because of heightened BTC demand. He explained:

Check out the chart again. The Kimchi Premium has spiked at the local bottom – not because Koreans are buying the dip, but because BTC is being converted to USD. Few Koreans are converting BTC into KRW. Other countries are likely seeing a similar trend.

The ongoing trade tensions may be driving this trend. With US tariffs expected to take effect, the US dollar (USD) is likely to strengthen against other fiat currencies, making it a more attractive store of value during economic uncertainty. As a result, South Korean investors may be converting BTC to USD rather than Korean won (KRW).

Where Is Bitcoin Headed Next?

Over the past 24 hours, more than $2 billion in crypto liquidations have occurred, with the vast majority being long positions. This liquidation volume surpasses those seen during major crash events such as the March 2020 COVID-induced market drop and the FTX collapse in November 2022.

While the US tariffs are set to take effect tomorrow, Trump is reportedly still in talks with Canadian Prime Minister Justin Trudeau, sparking optimism that the trade levies could be reconsidered or delayed. If the tariffs are called off, the crypto market may regain some of its recent losses.

However, to maintain its bullish structure and push toward a new all-time high (ATH), Bitcoin must reclaim the $105,000 price level. Some analysts, however, predict that BTC may need to retest the $76,000 range before resuming its upward trajectory. At press time, BTC trades at $96,864, down 2.2% in the past 24 hours.