Amid yen volatility, Bitcoin trading in Japan is soaring, influenced by divergent monetary policies and rising national inflation.
The volatility of the Japanese yen has led to a significant upturn in Bitcoin trading on Japanese exchanges. The Federal Reserve’s aggressive interest rate hikes starting from March 2022 have resulted in the yen witnessing one of the most substantial exchange rate turbulences in history. This uncertainty has been a driving factor for traders on Japan-focused digital asset exchanges, who have found solace in Bitcoin, the foremost cryptocurrency by market value.
In the first half of the year, Bitcoin’s trade volume on Japanese exchanges has jumped from 69% to 80%, as reported by Kaiko, a Paris-based data tracking firm. This represents a significant shift in the trading behaviors of those engaged in digital asset exchange. The total trading volume on these exchanges reached $4 billion in June, marking a dramatic 60% surge since the beginning of the year.
Increased Trading Pairs and Bitcoin’s Rising Value
Alongside the growing Bitcoin trade volume, the pair trading volume of Bitcoin and the Japanese yen (BTC/JPY) has seen a significant upswing. This year, the BTC/JPY trading pair volume rose from 4% to 11% of the total Bitcoin-fiat trading volume, underscoring the rising interest in Bitcoin trading in Japan.
This upsurge is not surprising, considering Bitcoin’s widespread reputation as digital gold. Many see it as a stable financial refuge, particularly in the face of traditional finance and fiat currency fluctuations. Countries experiencing inflation and unstable fiat currencies have seen a rising interest in such digital assets. Bitcoin’s value has reflected this trend, soaring by 84% to exceed $30,000 this year. Furthermore, Bitcoin has consistently traded at a premium on Japanese exchanges, ranging between 0.5% and 1.25%.
The Depreciating Yen and Future Bitcoin Trading Trends
As the U.S. dollar strengthens, the yen continues to depreciate, marking a 6.3% drop this year, adding to the previous year’s near 14% decline. This disparity stems from the divergent monetary policies of the Federal Reserve and the Bank of Japan. While the Federal Reserve continues its tightening approach, the Bank of Japan maintains its easing stance, which has been a key factor contributing to the yen’s downfall.
This rapid increase in Bitcoin trading in Japan surpasses the growth seen in both Korean markets and the Nasdaq-listed Coinbase exchange. The potential for further growth is significant, especially as Japan already has a regulatory framework for cryptocurrency in place. This contrasts with the U.S., where regulations are enforced reactively rather than proactively. Just last month, Japan implemented a groundbreaking stablecoin bill aimed at protecting investors.
Japan’s Inflation Impact on Bitcoin Demand
The persistent volatility of the yen suggests that this trend of increased Bitcoin trading may well continue. Speculation is rife that the Bank of Japan could soon adopt a more aggressive approach to its monetary policy, potentially leading to further uncertainty for the yen.
Additionally, after decades of chronic deflation, Japan is now witnessing a rise in inflation. A key measure that excludes the energy component recently recorded a high unseen for four decades. This uptick in inflation could stimulate further demand for Bitcoin, seen as a more reliable alternative to traditional currencies in times of economic instability.
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