Bitcoin trading booms, lures currency traders 

Bitcoin trading volume is soaring in Japan as wild price movements spur an increasing number of currency speculators to shift into the digital-money market.

Japan’s leading bitcoin exchange operator said Monday that it surpassed 200,000 customers this month, rising tenfold from a year ago.

Roughly 430 billion yen ($4.25 billion) in bitcoins were traded in Japan in the January-June half, the latest figures show, up about 50 times from the year-earlier period. In July alone, more than 200 billion yen in bitcoins changed hands, also multiplying by a factor of 50 from a year earlier.

Stage is set

Japan passed legislation on virtual currencies in May that has improved public trust in bitcoin and other digital money by demanding that digital currency exchanges strengthen their financial foundation and bolster record-keeping. Those new rules, focusing on user protection, also require exchanges to report suspicious trading activities to the Financial Services Agency.

The recent stalemate in yen exchange rates is the other major factor driving Japan’s breakneck growth in bitcoin trading. The Japanese currency appreciated sharply immediately after the U.K. referendum on European Union membership in late June, skyrocketing from above 120 yen to the dollar to around 100 yen. But the yen then eased back to between 100 and around 105 to the dollar, staying in that range since.

Many currency traders appear to think this range-bound condition will continue for some time. Though mixed signals from U.S. economic indicators make it difficult to read the timing of the next interest rate hike there, the Japanese government and the Bank of Japan likely will intervene if the yen-dollar rate crosses into sub-100 territory.

Magnet for speculators

The dormant foreign currency market has only accentuated the volatile nature of the bitcoin market. At the beginning of the year, 1 bitcoin was worth less than 44,000 yen. After soaring beyond 80,000 yen in mid-June, it now trades around 60,000 yen. Such wild swings make the bitcoin market irresistible for speculators.

“I used to invest in foreign currencies and investment trusts, but I have been buying bitcoins to increase my holdings,” an office worker in his late 20s said. After diving into the world of virtual-currency trading last year, he now frequently trades bitcoins, seizing upon market movements.

“It is easy to make quick profits trading bitcoins,” said a 20-something day trader. “The price sometimes moves nearly 20% in a day.”

Growth potential

Market research firm Seed Planning estimates the bitcoin’s annual trading volume will soar to 2 trillion yen this year.

“We have noticed a trend where investors who previously traded foreign currencies on margin take up bitcoin trading,” a company official said.

Japan’s bitcoin trading volume remains small compared with the more than 400 trillion yen in foreign currencies traded monthly. But this trading may take off, just as other new financial products gained popularity in the past once the regulatory framework caught up and gave them more legitimacy in the public eye.

Source: Nikkei Asian