The world’s largest bitcoin and cryptocurrency-trading demographic is Japanese men in their 30s and 40s with previous experienced in leveraged FX markets, according to a report by Deutsche Bank. However, it also described Japanese retail investors generally as “less financially literate” than their U.S. counterparts.
ZeroHedge reported the paper from Deutsche’s Masao Muraki found it’s not Japan’s legendary “Mrs. Watanabe” housewife FX traders driving the large yen-denominated portion of the crypto market after all. Instead, it’s “Mr. Watanabe” — men currently or previously active leveraged foreign currency (FX) traders.
Thanks in part to China’s flouncing out of the cryptocurrency trading market in late 2017, Japanese yen (JPY) trading is now 40 percent of the world’s total.
54 percent of the global FX margin trading volumes (including the far-larger fiat currency markets) is Japanese. Of those, 79 percent are male, and 63 percent are aged 30-49.
With those kinds of figures it’s no wonder the (deeply indebted) Japanese government would like to get its hands on some of the profits. Its National Tax Agency reminded everyone last week in a written statement that crypto-trading profits would indeed be taxed, potentially as “miscellaneous” income, at up to 54 per cent. That includes profits from blockchain splits/forks like Bitcoin Cash and Bitcoin Gold.
The report added that, according to research by a department of Japan’s own central bank, “Japanese retail investors are less financially literate” than U.S., U.K. and German traders, regardless of age group.
It also suggested Japanese traders prefer the potential high rewards and risk of leveraged trading and high volatility — which would help explain the attraction to cryptocurrencies.
However, the Bank of Japan reported that only 7.5 percent of FX traders actually realized their profit goals, with most quitting the game disappointed. Many newcomers get wiped out by a margin call resulting from a sudden price swing in the wrong direction.
That flies in the face of Japan’s (and its investors’) image as cautious and risk-averse — investing mainly in low-yield products like national bonds. While the country certainly has a large share of careful investors too, another large group prefers something more exciting.
Japanese cryptocurrency trading startups QUOINE and bitFlyer were both founded by veteran bankers who likely understood this spirit well. Seeing an opportunity, they moved quickly to capture the professional FX trading market in 2014 — right after Mt. Gox and long before many were even aware of bitcoin.
Why does Japan have such a huge appetite for FX and crypto trading? Tell us your opinions in the comments.