We’ve seen a huge increase in bitcoin trading volumes from Japan recently. Is that country responsible for the current bitcoin price run? And even if not, are those volumes the result of new conditions in the global bitcoin trading environment, or something else?
For years now, Chinese exchanges and the national currency RMB/CNY have dominated bitcoin trading. However their percentage fell recently after the Chinese government placed tight new restrictions on exchanges there.
Observers credited highly-leveraged margin trading and zero-fee exchanges to China’s dominance. With that came the accusation that exchanges were inflating their volumes further by allowing high-frequency trading — much of which was in-house.
These days, Japanese yen (JPY) trading represents a large slice of the pie. Data from Bitcoinity shows bitFlyer owns a huge percentage of JPY trading volumes. Bitcoincharts shows Japan’s Coincheck with a 14 percent share of all trading.
A year or two ago, the currency barely registered a blip. What caused its rise?
Land of the Rising Volumes
There are a number of factors that could be influencing these trends. The most obvious one is Japan’s new law recognizing digital currencies as legitimate payment methods, which has spiked interest and usage.
The second is that some Japanese exchanges offered fee-free trading in the past, which encouraged higher volumes. And thirdly, new government limitations on China-based exchanges may have traders looking for the next-closest option.
There’s already some anecdotal evidence that Chinese traders are active in Japan. Business, physical and cultural proximity between the two countries make it more likely.
However this Reddit thread from last week posited that Japan was not leading the price rally at all, and that the country’s exchanges were inflating volumes with in-house algorithmric (or “bot”) trading,
What Do Japanese Exchanges Say?
Bitsonline spoke to the CEOs of two of Japan’s largest exchanges to hear their opinions on the matter.
Mike Kayamori, CEO of QUOINE, said he thought Japanese trading “is not having that much impact” on the bitcoin price. As for volumes, Japanese exchanges “are more conservative as we are all going through the JP-FSA registration right now.”
QUOINE is also not completely fee-free.
“At QUOINE, we are charging fees on all trades other than spot trading of BTC/JPY. Every other currency pair, as well as margin trading, there is a fee. And our spreads are quite large, hence our volume is actually lower in April/May than it was March.”
Yuzo Kano, CEO of bitFlyer, said his exchange is under the scrutiny of a corporate auditor (E&Y) so its numbers could not be manipulated.
BitFlyer is also not fee-free, and volumes were coming from all currencies, he added.
“We charge trading fees for BTC and “swap point” for FX. So it’s a different situation from China before this January. We are seeing funds inflowing not only to BTC but also all crypto markets.”
Government Interference in Other Markets
Japanese traders and investors are possibly hungry for alternative investments right now. The Bank of Japan’s interference in other popular markets could be a factor.
Its quantitative-easing practice of buying up stocks and exchange-traded funds (ETFs) kicks in whenever the price drops. The BoJ buys about ¥1.2bn ($10.5 million USD) of ETFs every single trading day.
Some traders think the central bank’s ETF buying program has supported the wider market. It’s just a theory, but maybe traders from Japan’s vast financial industry are looking for new adventures. Large and small investors in the country have long been eager participants in the FX markets.
Is cryptocurrency just a new outlet for their enthusiasm, and one free from government interference? No matter what the reason or result, many will be watching the Japanese markets closely in the future.
What role is Japan playing (if any) in bitcoin’s bull run? Let’s hear your thoughts.
Images via bitFlyer, QUOINE, Pixabay