How Asian economies have driven Bitcoin prices and how long will it last

Reports have started coming in about how the fall in Chinese stock exchange might be fueling the rise in Bitcoin price. Jeffrey Gundlach‏, CEO of DoubleLine Capital was the first to point it out when he tweeted this.

https://twitter.com/TruthGundlach/status/867069946932609024

The Chinese yuan's weakness in the last two years has prompted the Chinese search for safe investments outside the country. However, this phenomenon was preceded by a fall in Bitcoin trade in China, in January. In fact, China's share of global bitcoin trade volume, as measured by trade in yuan, has fallen from a roughly 80 to 95 percent share to 10 percent or less since January.

Six-month bitcoin trade volume by currency

Source: CryptoCompare

Similar volatility has also been visible in Japan and Korean markets. All these phenomena can be traced back to the stricter implementation of Know Your Customer (KYC) and Anti-money laundering (AML) policies in these three countries.

Japan and South Korea, the third and fourth largest bitcoin exchange markets, have seen premium prices ever since the launch of local bitcoin exchanges and markets.

The Japanese bitcoin exchange has recently seen a sharp 25% fall in trading volume and market share due to the strong comeback of the Chinese bitcoin exchange market. This can be explained by assuming that Chinese investors were temporarily trading bitcoin in the Japanese bitcoin exchange market due to the suspension of withdrawals placed on local bitcoin exchanges by Chinese regulators.

https://twitter.com/iamjosephyoung/status/866898831329304576

Due to Japan’s extremely strict AML policies Japanese traders have not been able to take advantage of the arbitrage opportunity without being flagged by regulated exchanges and authorities.

South Korea, another giant Bitcoin market also has a similar volatile story to tell.

The premium rate on South Korean Bitcoin exchanges which used to hover around 10% increased to 30% on May 23rd.

This can again be attributed to the strict implementation of AML and KYC policies.

When a similar policy was implemented in China earlier, simultaneously suspending withdrawal of local Bitcoin exchanges, over-the-counter (OTC) markets such as LocalBitcoins saw a boom in business. OTC markets are Bitcoin trading platform wherein buyers and seller directly initiate deals to purchase or sell Bitcoin.

In South Korea, exactly the opposite happened. the demand for Bitcoin has continued to rise despite the premium rate that is currently being demonstrated by South Korea’s Bitcoin exchanges.

Looks like the Koreans might have a bit more law abiding citizens than the Chinese.

Add to that the fact that Moody’s has cut China's credit rating for first time since 1989, which will drive more Chinese to pull their money out of the Chinese economy and invest into Bitcoin.

All these and many more factors have gone into the steep rise of the Bitcoin market in the recent time. And if the writing is clear enough on the wall, the rise is going to continue for a while now.

Read more of my casual stories here
https://steemit.com/childhood/@kasati/unkept-journal-entry-1-god-never-takes