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Why Bitcoin Traders are Moving From China to Japan; Better Regulations

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It has been less than two weeks since the nationwide ban on Chinese bitcoin exchange ban was finalized and already, bitcoin traders in the Chinese market are already moving to Japan.

OKCoin and Huobi, two of the largest bitcoin exchanges in China that have been responsible for around 75 percent of bitcoin trades in the Chinese market, were given leeway by local financial regulators to operate until the end of October. That means, Chinese traders have at least a month to close their accounts, move their funds and search for other ways to trade bitcoin.

But, almost immediately after leading bitcoin exchanges in China announced their plans to halt their operations in the upcoming weeks, Chinese traders migrated to neighboring markets in Asia: Japan and South Korea.

Prior to the imposition of a nationwide ban on Chinese exchanges, the Chinese bitcoin exchange market accounted for around 10 to 13 percent of global bitcoin trades. At the time of reporting, South Korea has overtaken the Chinese market in terms of bitcoin trading volume, becoming the third largest bitcoin exchange market in the world and evolving into a powerhouse within the global cryptocurrency sector.

Today, the Chinese bitcoin exchange market accounts for less than 5 percent of global bitcoin trades and in four weeks time, China’s bitcoin exchange market will have no trading activity at all.

Despite the short-term impact of China’s crackdown on bitcoin exchanges, many experts including billionaire early-stage investor Tim Draper have viewed the exit of the Chinese market from the global bitcoin exchange market as a positive event, mostly because the Chinese government does not have any leverage to work with to potentially manipulate the bitcoin market or lower the value and the market cap of bitcoin.

Essentially, the Chinese government has used the last card in the deck in imposing a nationwide ban on bitcoin trading platforms and it has finally run out of leverage against the global bitcoin market. That provides a positive precedent and future for bitcoin price development and long-term health of the bitcoin market. In months ahead, the bitcoin market will demonstrate increased stability and distribution. As Draper noted:

“The deadwood of the Bitcoin ecosystem is leaving now. Our faith in the crypto economy will be well rewarded.”

More importantly, it is beneficial for the long-term health of the global bitcoin market that trading volumes from China are moving to Japan and South Korea, two countries that have the most practical and efficient regulatory frameworks for both bitcoin investors and businesses. Earlier this year, the Japanese government fully eliminated double taxation on bitcoin and legalized bitcoin as a payment method. Deloitte’s annual tax report read:

“The supply of virtual currency will be exempt from Japanese Consumption Tax (“JCT”). Currently, virtual currencies such as Bitcoin do not fall under the category of exempt sales, and as a result, the sale of virtual currencies in Japan have been treated as taxable for JCT purposes. Following the enactment of the amended Fund Settlement Law in May 2016, which newly defined “virtual currency” as a means of settlement, the sale of virtual currency as defined under the new Fund Settlement Law will be exempt from JCT. This change will apply to sales/purchase transactions performed in Japan on or after 1 July 2017.”

Consequently, large-scale multi-billion dollar technology and financial conglomerates have emerged in the Japanese bitcoin exchange market and industry. GMO, a major Japanese technology company, has already launched a trading platform for institutional investor and established a manufacturing line to create bitcoin ASIC miners and other mining equipment.

In the upcoming months, an increasing number of institutional investors and retail traders in Japan and South Korea will drive the price of bitcoin to all-time highs. Bitcoin trading volumes and market cap will likely be high than ever before, all due to the swift recovery of the global bitcoin market and the exit of an unstable bitcoin exchange market.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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3.4 stars on average, based on 3 rated postsJoseph Young is a finance and tech journalist based in Hong Kong. He has worked with leading media and news agencies in the technology and finance industries, offering exclusive content, interviews, insights and analysis of cryptocurrencies, innovative and futuristic technologies.




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Bitcoin

Bitcoin Price Resumes Holding Pattern as Futures Trading Soars

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The bitcoin price remained locked in a sideways pattern on Thursday, as virtual exchange volumes continued to retreat following a sharp early-week spike. However, a new report from the Chicago Mercantile Exchange (CME) confirmed a sharp increase in trading in bitcoin futures contracts, a sign that institutional investors were flocking to the asset.

BTC/USD Update

Bitcoin’s price is currently averaging $6,543 on major exchanges, according to CoinMarketCap. The leading digital currency continues to trade at a premium on Bitfinex, where prices hover around $6,720. In both cases, BTC is virtually unchanged compared with 24 hours ago.

The digital currency market has experienced very little change over the past three days as trade volumes continued to dry up following an unexpected upsurge on Monday. Bitcoin’s trade volumes are back down below $4 billion,

BTC is up nearly 4% this week, having adding more than $4 billion to its market cap. The digital currency is currently valued at $113.4 billion for a 53.7% share of the overall market.

The crypto market cap was valued at $211.1 billion on Thursday. Trading volumes across all major assets averaged $11.6 billion compared with 24 hours ago.

Bitcoin Futures Volumes on the Rise

Institutional interest in bitcoin appears to be on the rise, according to the latest trading data published by CME Group. Trading in CME bitcoin futures contracts jumped 41% in the third quarter, with the total number of open contracts increasing 19%.

Bitcoin futures contracts have recorded an average daily trade volume of 2,582 this year, with open interest reaching 2,696 contracts. Volumes appear to have spiked throughout the month of September, reaching a high of 5,881 contracts on Sept. 21.

The following chart, courtesy of CME, provides an overview of bitcoin futures volume based on notional value traded and open interest.

Bitcoin futures appear to have had a stabilizing effect on the market, a contrary view to the one proposed by the San Francisco Federal Reserve, which argued that securitization induced more volatility. Volatility in bitcoin’s spot price has been declining all year long, having recently touched new 17-month lows.

Over the past 30 days, bitcoin’s price volatility has averaged less than 2%, according to bitvol.info. The website’s volatility tracker reads 2.91% over the last 120 days and 3.82% over a 252-day window.

The CME futures contract expires at the end of the month. The contract offered by CBOE closes toward the middle of the month.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 647 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Analysis

Crypto Update: Coins Edge Lower in Quiet Trading

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The cryptocurrency segment continued to trade without momentum in the past 24 hours, as although some of the small-cap coins experienced heavy trading the top currencies are virtually unchanged. The technical setup is also little changed, with only Stellar getting closer making progress since the Monday market-wide spike. Ripple, which was also among the more active coins couldn’t maintain its momentum, while Bitcoin and Ethereum got stuck in very narrow short-term ranges.


BTC/USD, 4-Hour Chart Analysis

Bitcoin continues to trade between the $6275 and $6500 levels, as another very narrow trading range developed following the Tether-indices surge. The most valuable coin is still well below the previously dominant broad triangle pattern after last week’s breakdown, and the short-term sell signal remains in place in our trend model.

While the long-term setup is neutral, traders should still not enter positions here, with further resistance levels ahead at $6750 near $7000, and with support levels also found near $6000, $5850, and between $5000 and $5100.

Stellar/USDT, 4-Hour Chart Analysis

Stellar drifted above the key support zone that surrounds the $0.24 price level which also marked the top of the Monday rally. Should the coin hold above that level, a new short-term uptrend would be established even as the broader declining trendline is just ahead, and traders could enter small positions in anticipation of a break-out. That said, given the bearish segment-wide pressures, these setups are still to be treated cautiously, as no leadership has been established.

Top Coins in Deadlock as Long-Term Setup Still Bearish

XRP/USD, 4-Hour Chart Analysis

Ripple is still holding on above the key $0.42-$0.46 zone, but it still failed to show meaningful follow-through after the move out of the triangle consolidation pattern, and a new short-term uptrend is still not confirmed, so traders should still not enter positions here.  XRP faces strong resistance levels near $0.51, $0.54, and $0.57, while further support levels are found at $0.375 and near $0.35.

ETH/USD, 4-Hour Chart Analysis

Ethereum is trading in a similarly narrow trading range as Bitcoin, also on a short-term sell signal, with the focus being on the $200 support level. Ethereum’s long-term outlook is still clearly negative, with the broader declining trend being intact, and a move towards the bear market low remains likely in the coming weeks.

Traders and investors should stay away from the coin, despite Monday’ spike, as we expect the downtrend to resume soon. Strong resistance levels ahead at $235 and $260, while support is found at $180, $170, and $160.

LTC/USD, 4-Hour Chart Analysis

Litecoin also failed to make progress since Monday and a move below the $51 support level is very likely in the coming week. Below that support is found near $51 and the bear market low at $47, while the major zone of interest is near the $44 price level.

The weakness of LTC is a bearish sign for the whole segment, and traders should still not enter positions here, with strong resistance levels ahead near $56, $59, and $64.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 378 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Altcoins

Why Would Anyone Have Faith In Tether?

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I don’t want to get sued for slander so let me explain the reasoning beyond today’s title. After all of the turmoil surrounding Tether on Monday, how can the price be anywhere near the $1 parity level with the US dollar?  After more than a year, how can anyone have confidence in Tether and their common law partners Bitfinex when, for example, Circle, backed be the highly respected Wall Street giant Goldman Sachs offers an alternative?  We should also mention that Circle is just one of many so called stable coins.

It isn’t hard to find a list. Exchanges are feverishly adding stable coins. Singapore based Houbi is adding Paxos Standard Token (PAX), True USD (TUSD), Circle (USDC) and Gemini (GUSD).  

When Stable Coins Cause Instability

Well, the evidence is mounting as the months move along that so called stable coins can have the power of creating anything but stability.  This week’s experience with Tether, Bitfinex and the price explosion of Bitcoin demonstrates that there are still dangers lurking. This is why trust is important.

Monday’s gyrations were not the first questionable moment for Tether.  The coin, which gains its intended stability by being tied on a one for one basis with the US dollar, has been the subject of questionable behavior all year.  

As far back as January trade sources were expressing concern the Tether was responsible for last December’s major price bubble in Bitcoin.  The frenzy over Bitcoin set off speculation across the entire crypto spectrum. But that was just the beginning.

In June Bloomberg reported on a paper by John Griffin, a finance professor at the University of Texas, that among other things claimed 60% of last year’s price move in Bitcoin was the result of manipulation surrounding Bitfinex. That directly implicates Tether.

Using algorithms to analyze the blockchain data, Griffin’s team found that purchases with Tether were timed following market downturns and result in sizable increases in Bitcoin prices. Less than 1% of hours with such heavy Tether transactions are associated with 50% of the meteoric rise in Bitcoin and 64% of other top cryptocurrencies.

These findings prompted the US Commodity Futures Trading Commission to step in with a series of subpoenas.

Tether’s coins had become a popular substitute for dollars on cryptocurrency exchanges worldwide, and for good reason. They are anonymous, closely tied to the value of the US dollar and can be used in exchange for Bitcoin, Ether or about 10 other cryptocurrencies.  Tether is closely associated with Bitfinex, with whom they share common shareholders and management.

Bitfinex has offices in Hong Kong but it is legally headquartered in the British Virgin Islands. In May they announced plans to move to Zug, Switzerland. Bitfinex has a sorted history of poor security, having lost nearly $100 million worth of Bitcoin from customer accounts. Moreover, while claiming to have total one for one US dollar backing for each Tether, real proof is absent.  

Further Evidence of Manipulation

Over the course of this year, as we have gathered digitally to witness the loss of nearly $600 billion in crypto value, everyone has been looking for the culprit. When I first read of some of the academic studies that blamed the advent of futures trading on the CBOE, I laughed. Honestly, I believed the real cause of the rise and fall of crypto were a well connected group of billionaires that together had the power to move markets.  

Well the folks at Chainalysis have just produced some surprising research results. Their Blockchain Intelligence Platform powers investigation software for some of  the world’s top institutions. These guys don’t do surveys, the have their hands on big data that is able to detect some interesting stuff.

Chainalysis released a new report last week showing that the so called Bitcoin whales are not responsible for price volatility. The study examined the 32 largest BTC wallets, which reportedly represent 1 million BTC, or around $6.3 billion. That is a pretty solid sample size.

The data revealed that the BTC whales are do not act in concert with one another. In fact not only are they a diverse group but about two thirds behave like longer term investors. Instead of being FOMO (Fear Of Missing Out) types, on net they have traded against the heard buying on price weakness.

Putting The Pieces Together

The crypto world is bombarded with globally generated news on an hourly basis. But what does all of it mean anyway? Hopefully this article adds some perspective on what and who has been responsible for the direction of crypto prices over the past year.  As more of these weak players are identified and depleted of their business, real investors will have the confidence to return to the market.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 114 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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