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BitcoinBusiness & Finance

U.S. Dollar Wins Over Japanese Yen in the Bitcoin Trade

Few might have imagined this would ever happen, but the facts have now arrived; Japanese yen is behind US dollars in the Bitcoin business. And this has been proven by an in depth research by CoinDesk which has come across flaws in the systematic approach taken on by Japan in handling its Bitcoin exchange data. This has led to the importance of the Japanese yen being exaggerated in terms of a trading currency. The analysis suggests that according to the data compiled in the period of July 26-30, the U.S. dollar is the most used currency traded for Bitcoin in comparison with the Japanese Yen, which is far behind.

The issue might have arisen when most of the yen dominated exchanges were not used for major transactions so even if their sum would have exceeded the dollar exchanges, their net worth would have stayed far below. Most of the purchases were of derivative products which derive their worth from the routine of a fundamental asset. Analytical data from CryptoCompare and Coinhills suggests that more than half of bitcoin trading is dominated by Japanese yen. It can also be said that while there is nothing intrinsically mistaken about these facts, an artificial derivation of fundamental volumes can result in misleading evidences.

CryptoCompare’s data was also displayed by Bloomberg and the Wall Street Journal and it did not show up any difference in the volumes by Bitflyer which is Japan’s biggest exchange. Therefore both sorts of trading were accounted for to come up with the accurate yen-bitcoin figure. But their figure did not take into account the dollar consumed markets like the ones on Bitmex. This led to the yen and dollar totals not being in fair comparison to each other. Later, in the process of fixing the mistake, the data that resulted showed a completely altered outcome.

In the process of confirming the results, Japan has remained a hot topic in the world of cryptocurrency. Japanese bitcoin traders also straightened up when a law was passed in the former year that accepted bitcoin as officially permitted domain and allowed the country’s exchanges to pass through. Moreover, since the analysis only covered a five-day time, the outcome was not portrayed as a permanent standing between the dollar and yen. It was taken as a mere evidence of their performance in the cryptocurrency trading. But after many traders showed their concern, CryptoCompare decided to alter its methodology. Now its data displays the dollar above the yen.

Moreover, owing to the inconsistent behavior pattern in the various transactions which occur throughout countless exchanges, huge changes occur in the outcomes. But when these issues are addressed, it leads to better predictions in the world of cryptocurrency trade.

Some interesting details behind the scene

The formally discussed issues that arose in the process of valuation of both currencies have a backbone, formed by the Bitflyer’s sent data which is shared among different exchange markets. Bitflyer is in charge of the spot and derivative trades both, and the size of the trade often causes hindrances in coming up with the right market data.

On its own, the derivatives would not be considered an issue if the CryptoCompare and Coinhills would have included dollar-denominated derivatives in counting their total volumes. The issue arose when they dialed to do that. In just a 24 hour period, Bitmex also set a record of $8 billion in its trades. These derivative trades were also not taken into consideration by CryptoCompare’s and Coinhill in processing their final USD-BTC trading.

Making an unbiased comparison

In order to come up with the right facts, CoinDesk took into account the spot market, which consists of all derivative trading along with the total market, which consists of all the spot trading and the dollar and yen volume exchanges. This step suggests that the U.S. dollar is winning globally over the yen. The difference can be overcome within a few seconds, but in the cryptocurrency world, a few seconds is all you need to be the hero.

Later actions taken by Japanese authorities

The outcomes were of great importance to Japanese officials as they raised concerns regarding the impending illegal utilization of cryptocurrency. That would automatically translate to anonymous efforts to alter cryptocurrencies to fiat currency.

The dollar’s role in this exchange ecosystem extends the reach of the U.S. government. Just as the dollar’s preeminence in the international financial system gave U.S. regulators the leverage they needed to shape global anti-money laundering (AML) practices in the wake of 9/11, the dollar’s importance in global fiat-to-cryptocurrency trade could give them out sized influence as governments around the world mull new regulatory frameworks for cryptocurrencies.

The Japanese officials have done much to reach the AML standards. Yaya Fanusie, director of analysis at the Center on Sanctions and Illicit Finance at the Foundation for Defense of Democracies and co-author of a report on bitcoin laundering, stated;

If your assumptions are correct and the dollar in fact dominates on crypto exchanges around the globe, this data could prompt U.S. regulators to take a more active role.

When inquiry took place regarding the insertion of Bitflyer’s derivative data, CryptoCompare and Coinhill confirmed the fact that the exclusion of its data was the major issue that led to yen being predicted as the major cryptocurrency in the trade market. In its essence, the doubt, complication and invariable mix of the trade market, causes a struggle among websites such as CryptoCompare and Coinhill. In this kind of atmosphere, mistakes are likely to occur, no matter the source. Constantine Tsavliris, an analyst at CryptoCompare stated;

We do currently count Bitflyer’s Lightning FX volume, and thank you very much for pointing this out. We plan on excluding Bitflyer’s futures volumes from calculations at the end of this month,

In the end, CryptoCompare decided to get rid of Biflyer’s derivatives market data for its inaccuracy from the process of finalizing calculations.

Anoosha Mansoor

Cryptocurrency and fintech enthusiast. Contributes regularly to BlockPublisher with analysis of industry news. Email: editor.news@blockpublisher.com

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