How Asian Markets Are Affecting Cryptocurrencies
In late-2019, China reversed an earlier plan which would have banned crypto mining. This reversal was seen as a short-term win for the mining industry and also gave hope that China would be open to cryptocurrencies in a larger form. This event is one of the factors that caused cryptocurrency prices to jump at the end of October – Bitcoin went from around USD $7,500 to nearly USD $9,500, an increase of USD $2,000!
According to crypto-asset data and research platform Mosaic, there have been 11 major headlines that have caused Bitcoin fluctuations on an average of 18.61%, (Mosiac Blog). In the past several years, Asian markets began to involve themselves in the cryptocurrency industry, through creating exchanges, mining companies, and pools, investment networks, etc. In 2017, 20 crypto exchanges were created in the Asian markets alone, greatly affecting the number of investors in that region and therefore the prices. Moving forward, China’s reversal of its plan to ban crypto mining in the country has raised hopes that it will lead to an increase of crypto platforms and a positive move for the industry and blockchain technology.
Which Asian country has the largest influence on crypto markets?
While China certainly has the largest population, Singapore has raised the most funds out of any APAC country for initial coin offerings (ICOs) in 2018. Singapore raised approximately USD$340M compared to China’s USD$212M. This could be due to China’s initial thought process and its threatened ban of crypto mining in the country and the restrictions put in place for cryptocurrencies. This can be compared to Singapore's early regulatory implementations in 2014 that helped regulate the usage of cryptocurrencies making it a favorable location for crypto traders and companies.
In general, price fluctuations of fiat currencies affect crypto prices based on inflation and exchange rates. An unstable fiat currency, or one with an unusual amount of inflation/deflation, can push traders to cryptocurrencies. In other words, when people lose trust in their fiat currency’s stability some may find incentives in investing in cryptocurrencies as a way to hedge or make a profit.
Trading volume in Asian countries can greatly affect crypto prices as there is a large number of traders in that region as well as speculated crypto “whales” which are users with an extremely large amount of a specific cryptocurrency. Trading volume affects prices as fluctuation in demand can affect the supply of cryptocurrencies – where there is high demand, the prices will increase, and where there is low demand, prices will fall. High trading volume typically supports the idea that there is high demand, and the same goes for low trading volume indicating low demand.
China has the highest trading volume, at least for Bitcoin, out of any other APAC country – over USD$600M which ranks 5th overall across the globe. For comparison, the U.S. has the highest trading volume in the world at USD$1.4B.
While the APAC region holds nearly half of the world’s crypto exchanges, the United States has remained the largest market for cryptocurrencies over the years. In 2019, the SEC, IRS, and Congress have been moving forward in the cryptocurrency industry in various ways which have led many to speculate that positive legislation, such as the Token Taxonomy Act, will soon be implemented further boosting the industry. Foreign exchanges and companies have also begun to target the U.S. market such as Binance, one of the largest crypto-exchanges in the world. Binance US was specifically created to comply with U.S. regulations to tap into this massive market. Moving forward, I expect, as many others do, that Congress will look to implement legislation to regulate this industry and allow its adoption to become more mainstream.