A huge amount of trading in China seems to be creating a lopsided trading environment, a development that may look unhealthy to the cryptocurrency in terms of price stability.
The Chinese awakening
Michael Vogel of Netcoins tells Cointelegraph that what we are witnessing is an awakening in China. Vogel explains that more and more people are realizing the amazing value of Bitcoin and its usefulness as a safe haven in places like China.
“Now, Bitcoin is not just useful as a safe-haven, it's actually a very diversified tool with many use cases such as payments, smart contracts, remittance, currency, Blockchain data ledgers, and so on,” he says.
Vogel notes that the lopsided effect being created by the huge trading in China is undeniable, however, he explains that the sheer population size of countries like China and India make this type of effect only logical.
“International trade, real estate prices and other markets are also affected in a similar "lopsided" way by influence from Chinese market activity. This is just the reality of the playing field with an international commodity like Bitcoin. In fact, it's great to see China ahead of the curve of other countries with lower Bitcoin adoption rates.”
A peculiar investment landscape
Simon Dixon, CEO BnkToTheFuture.com describes the Chinese investment landscape as very different from the West. According to Dixon, Western countries rely on instructional fund managers to manage most of the population's savings through fund management, insurance and pension funds.
“80 percent of the stock market volume in countries like the United States and the United Kingdom are instructional investments. In China 80 percent of the stock market volume is due to retail investors investing their own savings,” Says Dixon.
Dixon explains that retail investors tend to favor higher risk, higher return investments while institutional investors favor lower risk and lower return investments. This is one of the reasons why Bitcoin has become a store of value in China faster than other Western populations.
Dixon also believes that Western institutional money is seeking new asset classes and will join the retail money investing in Bitcoin as a store of value in China, saying that when this happens, it is likely to occur in higher quantities.
Dixon concludes by pointing out that this has been heightened throughout 2016 by the interest the financial market has shown in the Blockchain, and this interest will eventually drive investors to Bitcoin as a store of value especially as the regulatory environment evolves.
“This is a turning point in Bitcoin history that will come with higher volatility as different pools of money in different jurisdictions join the Bitcoin economy which up to this point has been driven by Chinese investments and Bitcoin applications and development built in the West.”