The article analyzes both the market regulation and the circulation of the cryptocurrency in different countries
- Dynamics of the cryptocurrency market
In April 2018, the cryptocurrency market capitalization made up $488 billion. Daily trade volumes are estimated at $31.5 billion. This year, cryptocurrencies cease to be mere speculative tools as many participants use them for the solution of real business objectives. Besides, cryptocurrencies are now entering the mass market, which means they can be used for transactions in common places, such as certain cafés or restaurants.
- The most active countries
It is quite hard to determine the activity of separate states due to the lack of a unified statistics database. However, it is still possible to obtain the rough numbers. This is mainly thanks to online services that allow for the tracking of p2p Bitcoin exchanges to local currencies in different countries. Such services show the intensity at which participants are becoming involved in cryptoeconomics.
The following table presents the average weekly amounts of Bitcoin exchanges to local currencies through the LocalBitcoins exchange platform from January 1st to April 30th, 2018.
|Average weekly Bitcoin exchange amounts to local currency through the LocalBitcoins service (in BTC)|
Attention! Due to the high volatility of the p2p Bitcoin exchange services, these amounts may differ from the average values.
Russia, China and the UK are in the TOP-3. There has been a spike of activity in Canada: the weekly Bitcoin exchange volumes tripled, while their peak value reached 1149 BTC in April 2018.
This is due to the introduction of significant limitations to the use of Visa and MasterCard for the purchase of cryptocurrency. For the same reason, there were a few massive spikes in Europe (1052 BTC in February, as well as 1232 BTC and 1618 BTC in March).
At the same time, the activity of most of countries is on the decline. For example, in 2018 it is 7 times lower than its peak values in 2017. Notably, it dropped by 3.5 times in the UK and Russia. USA is the only leading country that maintained its stable growth.
The general dynamics of weekly Bitcoin exchanges to local currencies through LocalBitcoins is as follows (in BTC):
In addition, the countries’ activity in the cryptocurrency market reflects the number of installed Bitcoin ATMs. At the moment, the following situation is unravelling.
USA, Canada and UK are in the top three. Russia is not in the list as the country’s regulation authorities prohibit the installation of Bitcoin ATMs.
The diagram below details the currencies people exchange Bitcoins for at the major exchange platforms.
The Japanese yen is in the lead with 56%. It is followed by the US Dollar and USDT – a cryptocurrency assured by the US Dollar.
The domination of the exchange transactions by the Japanese yen is explained by the popularity of cryptocurrency trading among the Japanese. Today, over 3.5 million of the country’s residents are actively involved in the digital currency trade. These are speculative transactions where traders wait for the minimal price fluctuations and gain a short-term profit. In this way, the number of transactions and liquidity increases, though there is no new capital inflow.
The graph of the Bitcoin trading volumes (in USD) is as follows:
- Reasons for the deceleration of activity and inflow of new capital
The amount of trades, exchange operations activity, and capital inflow in the form of direct exchange of cryptocurrency to actual currencies dropped in the beginning of 2018.
There are 2 main reasons behind this:
- The decrease in Bitcoin exchange rates
- Undefined legal status of cryptocurrencies
In April, Bitcoin was traded at 53% lower than its maximum cost in December 2017. The mass inflow of investors has decreased. Statistics of search queries containing the word ‘bitcoin’ have dropped sixfold since December 2017.
The media is not shedding as much light on the cryptocurrency market as it used to, which means that the hype is on the decline. Further immersion into cryptoeconomics is expected to be smooth and moderate.
- State regulation
Other than the Bitcoin decline, investors are impeded by the cryptocurrencies’ undefined legal status. State regulation authorities have varying opinions and positions concerning the cryptocurrency market. For example, Brazil has forbidden investments into cryptocurrency, while Thailand has subject them to double taxation. South Korea has also introduced a series of limitations on anonymous transactions. China prohibits mining, stops ICO and direct transactions between yuan and Bitcoin.
At the same time, UK, Denmark, Sweden, Finland and the Netherlands seem to be quite in favour of Bitcoin. A few other offshore countries are developing legislation that is more loyal to cryptocurrency. And the first country to officially legalize cryptocurrencies in April 2017 was Japan.
The current situation of cryptocurrency regulation is shown below:
The situation impedes development of the field. Until regulating authorities develop clear policies and become systematic in their actions, large institutional investors will be unable to enter the market. And they are the major drivers of the field’s further growth and development.
In general, the outlooks are positive. Many countries are realizing the potentials of cryptoeconomics and are trying to regulate rather than fighting it. In addition, during the last G20 Summit, financial ministers decided to observe the world’s cryptocurrency market before creating standard groundwork. This is proof of the countries’ intention to support cryptoeconomics and develop adequate legislation that will take into account the specifics of the cryptoworld and not destroy its privileges.
In this way, 2018 will be the year of regulation for the cryptocurrency world. It is precisely the level of development of the standard-legal foundation that will have the most significant effect on the countries’ activity in the cryptocurrency market. Countries that will be capable of combining loyalty and regulation will become the leading participants in the cryptocurrency market.