December 2, 2020

$50 Billion in Cryptocurrency Left China Amid Escalating Trade Wars

$50 Billion in Cryptocurrency Left China Amid Escalating Trade Wars

Over $50 billion in cryptocurrency flowed out of China over the past 12 months amid trade wars, a new study finds. East Asia is the world’s largest cryptocurrency market; its crypto trading volume is driven by “a robust professional market” as well as an “extremely active” retail market.

The World’s Largest Crypto Market

East Asia is the world’s largest cryptocurrency market, a new report from blockchain data analytics firm Chainalysis shows. The region, which includes China, Hong Kong, Macau, Japan, Mongolia, South Korea, and Taiwan, accounted for about 31% of all cryptocurrency transacted in the last 12 months.

In an excerpt from its upcoming 2020 Geography of Cryptocurrency report, Chainalysis explained that more cryptocurrency was sent from East Asia than other regions to foreign addresses. “Over $50 billion traveled from East Asia addresses to addresses in other regions, compared to just over $38 billion for Western Europe, the region next in terms of value sent out of the region,” the firm revealed.

Most of the cryptocurrency outflow was from China, Chainalysis added, noting that the Chinese government only allows citizens to move an equivalent of $50,000 at the most out of the country each year. Wealthy Chinese have found some ways to circumvent the restrictions, such as via real estate and shell companies, but the authorities have been cracking down on these methods. “Cryptocurrency could be picking up some of the slack,” the firm noted, elaborating:

Over the last twelve months, with China’s economy suffering due to trade wars and devaluation of the yuan at different points, we’ve seen over $50 billion worth of cryptocurrency move from China-based addresses to overseas addresses.

“We can think of $50 billion as the absolute ceiling for capital flight via cryptocurrency from East Asia to other regions,” the firm suggested.

Relations between the U.S. and China have deteriorated to all-time lows in recent weeks as the two countries spar over issues such as the Covid-19 pandemic, Hong Kong, and Xinjiang.

$50 Billion in Cryptocurrency Left China Amid Escalating Trade Wars
Value sent from East Asia between June 2019 and 2020. Cryptocurrencies included are BAT, BCH, BNB, BTC, ETH, GUSD, LTC, MKR, OMG, PAX, TUSD, USDC, and USDT.

East Asia’s cryptocurrency trading volume is driven by “a robust professional market” and an “extremely active” retail market, Chainalysis highlighted. Roughly 90% of all crypto volume transferred from the region in any given month is “professional-sized,” meaning transactions are worth more than $10,000, the firm continued. Professional crypto investors in the East Asian market also appear to trade a wide range of cryptocurrencies frequently for speculation, unlike in North America, where professional traders focus more on bitcoin and hold for longer. “The liquidity of the East Asia market also makes it the closest we have to a self-sustaining market,” the firm remarked.

Stablecoins, particularly tether (USDT), are heavily traded in East Asia, accounting for up to 33% of all value transacted on-chain. “Tether is by far the most popular stablecoin in East Asia, making up 93% of all stablecoin value transferred by addresses in the region,” Chainalysis wrote.

$50 Billion in Cryptocurrency Left China Amid Escalating Trade Wars
Share of value sent to East Asia by cryptocurrency, such as BCH, LTC, ETH, USDT, and BTC.

Chainalysis emphasized that with China controlling about 65% of Bitcoin’s global hashrate, Chinese mining and capital flight have substantially contributed to East Asia’s trading volume, asserting:

East Asia-based addresses have received $107 billion worth of cryptocurrency in the last 12 months, which is 77% more than Western Europe, the second-highest receiving region.

Although East Asia remains the world’s largest cryptocurrency market by a wide margin, its share of the overall crypto activity has been declining since October last year, Chainalysis further noted.

What do you think about cryptocurrencies leaving China? Let us know in the comments section below.

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