Why Investors Are Piling Into Bitcoin Despite the Risks | WSJ
Bitcoin hit newspaper headlines this week with a dizzying surge to record highs. However, there is a trend that could change the face of the cryptocurrency market: massive flow of coins to North America from East Asia.
Bitcoin, the largest and most original cryptocurrency, soared to an all-time high of $ 19,918 on Tuesday, boosted by demand from investors who view virtual currency as an asset with «risk», inflation hedging and payment method widely accepted around the world.
But this boom is a shift in the cryptocurrency market, typically dominated by investors from East Asian countries such as China, Japan, and South Korea, since the digital currency was invented by the mysterious Satoshi nakamoto more than ten years ago.
We won the most in Bitcoin Rally 165% This Year North American Investors.
According to data compiled by Reuters, the weekly net inflow of bitcoins – proxies for new buyers – to platforms serving primarily North American users has grown to more than 7,000 this year. times and dom to more than 216 thousand bitcoins worth $ 3.4 billion in mid-November.
And crypto exchanges in East Asia have lost cryptocurrency.
According to the American blockchain researcher Chainalysis, last month those who serve investors in the region lost 240 thousand bitcoins worth $ 3.8 billion compared to the influx of 1,460 coins in January.
As follows from interviews conducted by Reuters with cryptocurrency platforms and investors from USA and Europe to South Korea, Hong Kong and Japan, this change is driven by the growing appetite for bitcoins among large American investors.
«A sudden influx of institutional interest from the North American region is causing a shift in bitcoin trading, resulting in a rebalancing of asset allocations across different exchanges and platforms», – reported Ciara sun from Huobi Global Markets in Seychelles, whose parent company has roots in China and operates in several Asian markets.
According to Chainalysis, which collects data by region using tools such as cryptocurrency wallet labeling, East Asia, North America and Western Europe are the largest Bitcoin concentration centers, with the first two regions accounting for about half of all transfers..
Industry experts warn that it is too early to talk about fundamental changes in the market, especially in an unprecedented year of financial turmoil caused by the coronavirus pandemic..
The growing flows to North America this year are not necessarily «an indication that the center of gravity is shifted towards the USA», considers James quinn from Q9 Capital, a Hong Kong-based cryptocurrency wealth manager.
Others also point out that cryptocurrency trading is very opaque compared to traditional assets and is regulated in a fragmented manner, making it rare to have comprehensive data on this emerging sector..
However, Chainalysis found that North American trading volumes on major exchanges – the ones with the most blockchain activity – surpassed East Asia this year. This is not unusual as North America has sometimes moved forward in the past, but never by such a wide margin..
Trading volumes on the four major North American platforms have doubled this year to 1.6 million bitcoins per week at the end of November, while trading volume on 14 major East Asian exchanges surged 16% to 1.4 million, according to the data..
For comparison, a year earlier, East Asia was in the lead with 1.3 million per week against 766 thousand in North America..
Experts interviewed by Reuters said American investors, who were previously held back by the market’s opacity, are attracted by tightening oversight of the American crypto industry..
U.S. exchanges are generally more heavily regulated than many East Asian exchanges, and U.S. regulators and law enforcement have taken several steps this year to clarify how bitcoin is overseen..
For example, in July, a leading banking regulator said national banks could provide cryptocurrency custody services. In October, the Ministry of Justice also laid out an enforcement system for digital coins..
«You are increasingly starting to see differences in the marketplace between those who do not have a regulatory framework or regulatory clarity and those who do, ” said Curtis ting, representative of the large American exchange Kraken. – Larger institutions strive for the predictability that the regulated entity offers».
Assets managed by New York-based Grayscale, the world’s largest digital currency manager, surged to a record $ 10.4 billion, up 75% from September. His Bitcoin fund is up 85%.
«Many US funds trade with large US counterparties», – said Christopher matta from 3iQ, a Canadian digital asset manager with US clients, citing an example of such exchanges like Coinbase from California, which are controlled by New York’s financial regulators. – This speaks directly to how important the regulatory nature of the space and the availability of regulated trading platforms. This is definitely what institutional investors are thinking.».
Another factor behind the 2020 trend, crypto experts say, is the shrinking army of retail investors in Asia that led to the Bitcoin boom in 2017..
According to In ho from the Blockchain Research Institute of Korea University, strict rules discourage such investors.
Concerns that large retail exchanges linked to China but headquartered elsewhere could be gripped by Beijing’s crackdown may have dampened demand, said Leo wiz, co-founder of the Hong Kong Bitcoin Association.
For example, in October, Malta-based OKEx, a China-based company based in China, suspended cryptocurrency withdrawals for nearly six weeks because one executive was cooperating with an investigation by Chinese law enforcement..
OKEx resumed withdrawals on November 26, and its reserves fully covered deposits, so users could withdraw funds without restriction, said Lennix lai, Financial Markets Director.
While Asia remains a major hub for cryptocurrency trading, there is a deeper shift in some exchanges..
«Currently, I think the influence comes from North America – said Yuzo kano, co-founder of bitFlyer in Tokyo, which operates exchanges in Japan, Europe and the United States. – Many people buy there».