People in the U.S. or the western world may not be aware of this, but Asian markets play an instrumental role in affecting the value and trade volume of cryptocurrencies
. Three countries that make a significant impact on Bitcoin values are Japan, China and South Korea. Statistics show that these three countries accounted for more than 50% of the trade volume for cryptocurrencies in 2017.
The Role of Japan
Japan is the birthplace of Bitcoin and cryptocurrencies. Some of the first mining operations in the world were set up in this country. Satoshi Nakamoto, the pseudonym associated with the creation of Bitcoin platform, is believed to have started his operations in Japan.
Digital currencies have been very popular with the Japanese public who quickly adopted the currencies for daily transactions. A number of banks offer their customers accounts in Bitcoin and other cryptocurrencies.
The Japanese government mostly left cryptocurrencies markets free to operate without intervention. The first major regulations were rolled out after the Mt. Gox crash in 2014.
In an effort to bring the exchanges into the mainstream and improve transparency, the government rolled out its licensing program for virtual exchanges, wallet and payment providers. It is one of few developed economies in the world, which has been receptive to cryptocurrencies.
China and Cryptocurrencies
There was a time when Chinese investors were leading the Bitcoin trading around the world. Chinese exchanges accounted for up to 90% of the daily trading volume in Bitcoin. In September 2017, the Chinese authorities cracked down upon crypto exchanges and mining operations
in the country.
This led to a crash in the global markets. The trading volume in China fell to a fraction of its previous high levels. Many exchanges and mining operations moved to Hong Kong which has its own regulations that are separate from the rest of China.
The head of Hong Kong’s Bitcoin operations, Lao Weese, believes that there are still thousands of active investors in mainland China with significant holdings of cryptocurrencies but the number is a lot lower than where it once was.
Apart from the investor angle, China is also important in the crypto markets due to the high number of mining operations that have been set up in the country. Running a mining operation requires large consumption of energy. As energy prices in China are low compared to other developed economies in the world, many investors have shifted their operations to the Asian country to reap the benefits of low energy prices.
South Korea Trade in Cryptocurrencies
South Korean investors were slightly late to the party and trading in Bitcoin picked up only in the last two years. The investors from the smaller nation were quite aggressive in their purchasing and led the bullish trend that saw the value of Bitcoin appreciate to over $15k.
In January 2018, the South Korean regulators cracked down on the virtual exchanges operating in the country. The government issued a strong statement that they were looking to ban the cryptocurrency
trading as it was being used for criminal activities and money laundering.
The government stance has somewhat softened since January but there is still no sign that business would resume as normal.
Unless Bitcoin and other cryptocurrencies are allowed to trade in the three major Asian economies, it is unlikely that the coin would do well in the long run.