Asia Asia Asia!
Earlier today Bitcoin was inching ever closer to $2100 USD. That, after smashing through the $2000 barrier the day before. Seemingly on an endless move higher.
What's even more astonishing is the moves we have seen in the altcoin space.
For those of you new to the space, altcoins are defined as:
"The alternative cryptocurrencies launched after the success of Bitcoin. Generally, they project themselves as better substitutes to Bitcoin. The success of Bitcoin as the first peer-to-peer digital currency paved the way for many to follow. Many altcoins are trying to target any perceived limitations that Bitcoin has and come up with newer versions with competitive advantages. There is a great variety of altcoins." (http://www.investopedia.com/terms/a/altcoin.asp)
The entire crypto space has seen a massive increase in it's total market cap over the past few months as noted here:
https://steemit.com/cryptocurrency/@jrcornel/the-cryptocurrency-market-cap-breaks-usd60b-for-the-first-time-ever
It was originally reported that the entire space accounts for over $60 billion in total market cap. Well, as of late yesterday that number officially moved to over $70 billion in total market cap. Money is flowing into the space at an alarming rate.
What's astonishing is that Bitcoin is accounting for less than 50% of it for the first time ever:
https://steemit.com/bitcoin/@jrcornel/bitcoin-now-accounts-for-less-than-half-the-market-cap-of-all-cryptocurrencies
Who exactly is driving this move?
That depends which move you are talking about. The rise in Bitcoin or the rise in the altcoin market?
The most recent increase in Bitcoin prices can mostly be attributed to institutional investors in the US, Japan, and South Korea.
If you compare the South Korean dollar volume in this chart with the one at the top from a few days ago you can see a massive increase in KRW dollar volume in just the past couple of days.
There is also an arbitrage opportunity that currently exists between US based Bitcoin exchanges and Japanese and South Korean Bitcoin exchanges.
Bitcoin is currently trading near $2300 on those Asian exchanges while on the US based exchanges it's trading just under the $2100 mark. That represents a 10% premium for those wanting to play the arbitrage game.
The CEO of CryptoCompare, Charles Hayter said that the arbitrage opportunity is a big reason for the recent price surge in Bitcoin saying:
"Arbitrage between the fiat pairs drags markets up or down in line with leading markets. At present, volumes on the KRW and JPY pairs dominate trading with a combined 48 percent market share.”
The increase in altcoin prices is likely coming from a different kind of investor all together.
The legalization of digital currency and the elimination of consumption taxes on virtual coin transactions in Japan have convinced beginner and casual investors that ALL cyrptocurrencies are created equal. Bitcoin's success has created a false sense of confidence among less sophisticated investors.
According to Japan-based researcher and IndieSquare co-founder Koji Higashi, most investors are investing in cryptocurrencies apart from Bitcoin with relatively shallow knowledge and understanding of digital currencies. He went on to further say:
“I think I know the answer now. Newly entering Japanese investors are driving this great altcoin bubble and not-so-smart money is flowing into the space especially into some altcoins at a rather concerning rate. Another thing to note about this new trend is that the general lack of understanding or appreciation of the technology by many of new users.”
So, we have institutional money flowing into Bitcoin and we have new, first time, mom and pop' investor money flowing into the altcoin world. There is a good chance at least one of these are in a bubble, which one would you put your money on?
There are several other factors fueling the demand for altcoins, including the large number of new exchanges being created in Japan and South Korea. The most popular altcoins are being added to those exchanges almost daily.
There are also rumors that Russia may go the same route as Japan and other parts of Asia in the next year or so. Can you image the kinds of prices we could see if that happens as well as if many other countries join the party?
Enjoy the ride my friends!
Sources:
http://www.investopedia.com/terms/a/altcoin.asp
https://cointelegraph.com/news/japanese-investors-might-be-fueling-the-next-altcoin-bubble
https://cointelegraph.com/news/bitcoin-price-hits-2087-trading-in-japan-south-korea-for-2350
Image Sources:
https://cointelegraph.com/news/bitcoin-price-hits-2087-trading-in-japan-south-korea-for-2350
