BXB Capital: Started from the Kimchi premium, once entered the Korean market with Binance

BXB Capital, previously known for its kimchi premium and the first Korean won-backed stablecoin, was also a partner in Binance’s attempt to break into the South Korean market.

Written by: Zen

Singapore-based crypto hedge fund BXB Capital (or Block by Block Capital), co-founded by former Binance Korea co-founders JJ Petersen and Alex Friedberg, will launch a bitcoin-focused trading fund in July. It plans to raise 1,000 bitcoins (nearly $27 million), and has so far raised about 400 bitcoins (about $10 million).

It is understood that the fund will only raise funds in bitcoin and will also only trade in bitcoin and provide bitcoin returns. Bitcoin is seen as a more popular safe haven than the U.S. dollar, according to a Markets Live Pulse survey conducted by Bloomberg last week. Earlier this month, Tether, the issuer of the world's largest stablecoin USDT, said it plans to regularly invest up to 15% of its profits in bitcoin as it shifts its reserves into the cryptocurrency and away from U.S. government debt.

BXB Capital, which previously gained attention for its kimchi premium and the first Korean won-backed stablecoin, was also a partner in Binance’s attempt to break into the South Korean market.

Make a fortune from the kimchi premium

BXB Capital was founded in 2017 by Alexander Petersen and Alexander Friedberg. JJ Petersen has been active in the field of trading and investment. In 2007, he became the youngest licensed investment advisor in Arizona. After entering the crypto space in early 2017, his background in PC hardware landed him a partner in Bitcoin mining operations.

Alexander Friedberg likes technology and emerging software. During his undergraduate studies, he co-founded two online start-up companies, and then successively worked in Amazon.com, Korean e-commerce company Coupang, and Southeast Asian online car-hailing platform Grab. In early 2017, he was attracted by the explosion of blockchain technology and the consequent paradigm shift in product development. After founding BXB, he has been active in Singapore, Korea and Southeast Asia.

During the initial period of BXB Capital, South Korea was very enthusiastic about investing in cryptocurrencies, and Korean investors had a more obvious herd effect. Coupled with South Korea’s strict foreign exchange controls, its trading market has always been relatively an "isolated island". The Korean market often has a large price difference with other markets. When there is a positive premium, it is called "kimchi premium", and vice versa, it is called "reverse premium".

Taking advantage of the "kimchi premium" phenomenon, BXB started a Bitcoin spread arbitrage transaction, that is, buying Bitcoin in the United States and then selling it to South Korea. The two founders once shared the situation of kimchi premium in an interview with the media. They said that in 2017, they could earn more than 1 million US dollars per day.

Korean stable currency KRWb, acquired by Binance

At the beginning of 2019, BXB Capital, based on the concept of stable currency supported by USDT, TUSD and other fiat currencies, let its subsidiary BXB Lnc. launch the KRWb token based on the ERC20 protocol in South Korea, a localized token anchored at a ratio of 1:1. A stablecoin based on the South Korean Won. When KRWb was first launched, BXB announced an initial capital deposit of 400 million won, which was used to mortgage an equivalent amount of newly minted KRWb. According to the team's idea, KRWb is not only pegged to Korean won and can be used as a stable value store, but also can participate in the global encrypted economy on the basis of Korean won denomination, which makes KRWb a cost-effective foreign exchange hedging product, and over time, The difference in cryptocurrency prices between South Korea and the global market will be reduced.

However, the life cycle of KRWb is only 18 months from forming the team to closing the project.

In January 2020, BXB Inc. was acquired by Binance. The two parties cooperated to establish Binance Korea and jointly launched BKRW, a Korean won stablecoin under the Binance brand. As the businesses of BKRW and KRWb did not overlap, and the operational and financial difficulties of maintaining two separate businesses, roadmaps and activities were beyond the capabilities of BxB, the KRWb project had to be abandoned as a last resort. Binance Korea’s business in South Korea is also not going well. Its issued token BKRW has low usage and low trading volume. The exchange eventually closed down after less than a year of operation due to tight liquidity and low trading volume.

It is worth mentioning that Binance has not given up on the Korean market. In February of this year, Binance announced that it had acquired a majority stake in struggling South Korean crypto exchange Gopax. The funds for the acquisition came from a $1 billion joint investment project led by Binance called the Industry Recovery Plan. The terms of the transaction were not disclosed.