CoinDesk Analyzes CryptoCompare and CoinHills Trading Stats, Sees USD Volume More than JPY


The US Dollar is the Number One Fiat Currency in Bitcoin Trading

Despite the widespread perception that Japan is a global blockchain trailblazer, market statistics heavily disagree. According to a research by leading cryptocurrency website CoinDesk, there are significant procedural flaws in the BTC exchange data that ranked the Japanese yen as the most dominant fiat trading pair. Instead, the site discovered that the US dollar is the most preferred fiat option for Bitcoin investors, beating JPY by a considerably wide margin.

As per data provided by CryptoCompare and Coinhills, the Japanese yen currently enjoys over half of the Bitcoin trading worldwide. While this is somewhat true, most of the transactions involving JPY are not ‘spot’ trades dealing exclusively in BTC and the yen. Rather, they are derivative products, which are essentially contracts whose value is derived from the performance of underlying assets. Simply put, these transactions hedge bets on the value of Bitcoin, without actually trading in Bitcoin. Therefore, using such data against spot trading volumes often produces misleading information.

In this instance, the data from the two analytics sites mentioned above did not make a distinction between the derivative and spot trades. The data was sourced from the largest crypto exchange in Japan, Bitflyer. Notably, the data included both types of trading, leading to the propagation of skewed information. On the other hand, data obtained from the Bitmex exchange put the dollar way ahead of the yen.

Nevertheless, Japan is still one of the most favorable locations for cryptocurrency trading. In 2017, the Japanese government enacted regulatory measure on crypto exchanges and acknowledged Bitcoin as a legal tender. Also, the scope of the resort conducted by CoinDesk was limited, meaning that the US dollar is not necessarily the most dominant currency in crypto trading. That being said, the varying statistics concerning cryptocurrency trading volumes highlight that the industry is yet to establish a universally acceptable standard for making such calculations.

Distorted Data

As mentioned earlier, the distorted information resulted from the misclassification of data by the Bitflyer trading platform. During the research by CoinDesk, the average daily trading volume of the Japanese YEN on Bitflyer was worth $2 billion. Expectedly, these figures influenced the statistics disseminated by both CryptoCompare and Coinhills. Even worse, this information is not inclusive of the dollar’s derivative trading volumes.

In comparison, Bitmex achieved a record high $8 billion worth of BTC derivative trading within 24 hours. This figure is significantly higher than the one posted by Bitflyer, and the analytics sites decided to overlook it. After comparing the spot trading volumes of the USD and JPY in the four leading derivative exchanges, CoinDesk established that the dollar is the more dominant of the two fiat currencies.

Enforcement Of Regulations

Usually, the government pays close attention to the spot trading market because of the potential use of digital currencies to fund illegal activities. This is became criminals are heavily reliant on spot trading to exchange the illegally acquired money into cryptocurrency. Consequently, the US government has all the justification to enforce stringent regulatory measures against digital currencies. As of now, the Japanese are on the forefront of pushing for the enactment of KYC/AML regulations, but the dominance of the US dollar is likely to change this.

Data Deluge

Obviously, the presence of multiple sources coupled up with the complexity and rapidly evolving nature of cryptocurrency markets is the primary reason behind the dissemination of distorted information. When CoinDesk highlighted the discrepancies in the data provided by CryptoCompare and Coinhills, both sites confirmed that their main source was the Bitflyer exchange. However, the sites affirmed that they will consider info from other sources in the future.

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