An excerpt from Chainalysis’s upcoming 2020 Geography of Cryptocurrency Report claims that over $50 bln worth of cryptocurrencies have moved from Chinese addresses to overseas accounts.
The blockchain research firm released the excerpt on August 20, which takes a deep dive into the Easy Asian cryptocurrency markets. Chainalysis reports that East Asia accounted for over 30 percent of global cryptocurrency transactions in the past year.
There is a firm highlight on the fact that China has a major role to play in the mining of Bitcoin. The country accounts for over 60 percent of the global Bitcoin mining hashrate and a large portion of newly mined Bitcoin originate from Asia-based addresses.
East Asian alt coin trading
The East Asian market seems to have a keen interest in trading a wider portfolio of alternative cryptocurrencies that its European or American counterparts.
Alt coin trading activity accounted for about 16 percent of the trading volume over the past year, well ahead of most other trading regions identified in the report. Another interesting insight is that Bitcoin only accounts for 51 percent of the trading volume, a result of a bigger interest in alt coin trading and Stablecoins, which we’ll explore in the next chapter.
The breakdown of the various alt coins reveals that Litcoin has a larger trading volume share in East Asia compared to the other regions. Crypto.com Coin, Maker, and Bitcoin Cash are also trading more extensively in East Asian markets.
East Asian cryptocurrency users trade more frequently as well as opposed to American traders that tend to buy and hold cryptocurrency for longer periods.
Another key takeaway from the report was the role that Stablecoins play in the East Asian market. The use of Stablecoins accounts for up to 33 percent of all trading activity on chain.
The demand for Tether (USDT), the US Dollar-backed Stablecoin, has been so high that it has overtaken Bitcoin as the most received cryptocurrency by addresses in East Asia in June 2020.
Tether pretty much holds a monopoly over the Stablecoin market in the region, accounting for 93 percent of the Stablecoin trade volume over the past 12 months.
The success of Tether is directly attributed to China’s ban on the use of purchase of cryptocurrencies for the Yuan back in 2017, while buying Tether with fiat currency is also not permitted by the new regulations.
As a way around these sanctions, users reportedly buy Tether throught over-the-counter traders as a stand-in for fiat currency. Users will buy Tether and leave it in their wallet or exchange account to execute trades more easily.
This also mitigates the inherent risk of holding Bitcoin to trade with, as its value is prone to volatility.
Outflow of crypto
The excerpt wraps up with its analysis of the outflow of cryptocurrency from China in the last 12 months. It highlights that $50 bln worth of cryptocurrencies has moved from East Asian addresses to international ones.
While it is highly unlikely that a large portion of this is capital flight from the region, part of this figure will account for people moving value out of East Asian addresses. Regulations in China restrict citizens from moving more than $50 000 out of the country but people have invested in real estate and other assets offshore as a workaround over the past few decades.
Overall the analysis provides some interesting insights on the trading environment in East Asia and how it has developed into an integral part of the global cryptocurrency trading environment.