We have seen a few instances now where problems in the fiat monetary system within a country can see a sometimes dramatic shift towards digital currencies as a viable asset for funds. Recent examples include both Greece and Venezuela, and now we see in Japan Bitcoin trading increase over 50 times in volume from year to year. With no obvious collapse in the Yen, is there something different driving things this time, and what does it mean for cryptocurrencies in the future?
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We have noted before that as the fiat monetary system in a country begins to suffer, there is an increasing trend that sees investors and others turn to digital currencies along with the other more traditional assets such as precious metals. The latest example of this is found in Japan, however it is a somewhat different situation to the previously discussed Greece and Venezuelan occurrences.
In the first half of 2016, Bitcoin trading in Japan rose by over 50 times its levels for the same period in 2015, according to Japan’s largest Bitcoin exchange, bitFlyer. By any standards that is a staggering increase for any tradable asset, but with no obvious collapse in the fiat currency system in Japan, what is it driving this?
There have been several different causes that have combined to produce this growth, and the first is actually legislation. The Japanese government passed new laws this year regarding digital currencies, that require all cryptocurrency exchange operators to register with the Japanese regulators, the FSA, along with improved reporting and financial backing requirements. What this has done is given the public much more confidence in the concept of digital currencies, and as the most well-known, easily accessible and visible of them all, Bitcoin has seen the greatest benefit from that.
However, that is not the only thing that has occurred, the Yen is in a kind of limbo in terms of valuation that is almost at a stagnant stage, but the Yen is also at risk from a move from US interest rates which is unpredictable in terms of timeframe in the run up to an election, and this is seeing many switch to the more volatile Bitcoin markets for better chances of profits.
So, like other countries, we see that issues with the fiat system can tempt people to turn to Bitcoin as an investment vehicle, and although the issues investors are having with the Yen are very different from those faced in Venezuela and Greece, what is very welcome to the cryptocurrency industry is that the response, looking to digital currencies as an asset for investment, remains constant. That itself is a change, as it shows just how much trust and visibility the concept of digital currencies is building.