With events like SEC approval for Bitcoin ETFs and the introduction of cryptocurrency derivatives, it is easy to imagine the market being driven by news out of the United States. However, new research suggests that Asia, and not the West, is the dominant driver of Bitcoin price and cryptocurrency markets.
Western Focus Might be Misleading
Jay Clayton, the Chairman of the United States Securities and Exchange Commission (SEC) commented back in June 2018 as part of his comments about the Commission’s stance on whether cryptocurrencies where securities or not, saying:
We’ve (the SEC) been doing this for a long time, and we’ve built a $19 trillion economy, a securities market that is the envy of the world, following these rules.
While it is true that the Western hemisphere exerts a lot of dominance over the mainstream asset market, the same doesn’t necessarily apply to Bitcoin and the altcoin market. However, it isn’t unusual to see US-based “trading experts” to argue that things like the CME and CBOE BTC futures are driving Bitcoin price [coin_price].
According to Mosaic, a cryptocurrency data and research firm, developments in Asia exert a significantly greater effect on the virtual currency market than the ones from the Western part of the globe.
The research firm says there have been 11 major news developments from Asia concerning cryptocurrencies. These headlines impacted the market by an average of 18.61 percent.
The most significant of these developments came at the beginning of the year when CoinMarketCap removed data from South Korean exchanges. According to Mosaic, this singular event crashed the market by more than 57 percent.
Back in mid-2018 when BTC price rallied from $6,200 to $8,000, many commentators pointed to news coming out of Asia. At the time, wealthy Chinese citizens turned to Bitcoin as a haven as the government accelerated the devaluation of its currency.
Asia Dominates Mining and Cryptocurrency Exchange
To start with, Asia dominates both the mining and exchange landscape. Even with the crackdown by China, other places like Singapore, Hong Kong, Japan, and South Korea are hotspots for numerous cryptocurrency exchange platforms and related businesses.
Why is this information relevant? Well, apart from the apparent trading volume conclusion, there is also the language component. These Asian exchanges make sure their services are offered in their local languages, bringing trading closer to the local population. With relatively cheaper electricity, the region (especially China), is still a dominant player in the bitcoin mining industry.
Earlier this year, Arthur Hayes, CEO of Hong Kong-based BitMex platform, said that crypto trading in Asia is more developed than in the West.
“Asia dominates cryptos because they’re very used to digital trading assets. South Korea has been trading digital goods related to gaming for two decades. When you move to a purely money based digital currency, they understand that culturally, so they get on board quickly,” he said. Therefore, it stands to reason that news out of that region would have a much greater sway on the market than in the US and Europe.
The researchers conclude that due to the “pivotal role” Asia plays in cryptocurrency, “investors seeking a better idea of what drives crypto prices would do well to look East.”
Will an influx of US-based institutional investors shift the tide of dominance towards the Western hemisphere? Please share your thoughts with us in the comments below.
Image courtesy of Mosaic.io., Shutterstock