SEOUL/MUMBAI (Reuters) - Bitcoin's runaway rally is being driven by investors in Asia.
Traders in South Korea, China, and other Asian nations are responsible for approximately 70% of bitcoin trading volumes, mirroring the situation in 2021 when bitcoin last reached such high levels, as per cryptocurrency exchange data from The Block.
In February, Asia contributed $791 billion to the $1.17 trillion worth of bitcoin trading, with North American investors significantly trailing at $113 billion. This trend has persisted since November, according to the data.
In China, many small investors frustrated with a sluggish stock market are experiencing FOMO (Fear of Missing Out). Searches for "bitcoin" on the popular messaging app WeChat surged 12-fold in February.
Mia Wang, a finance industry employee in China's Zhejiang province, expressed her desire to purchase Bitcoin at an opportune price and hold onto it. She acknowledged the significant price increase but expressed concerns about a potential lack of correction.
Bitcoin is currently trading around $65,000, close to its record of $69,000, following a remarkable 148% surge since early October. This surge is primarily attributed to U.S. regulators approving spot bitcoin exchange-traded funds (ETFs). BlackRock's iShares bitcoin trust has notably benefited from these investment flows.
Traders are also entering the cryptocurrency market in anticipation of the upcoming "halving" event in April, which could reduce supply and drive up prices. With a limited supply of 21 million bitcoins, 19 million tokens have already been mined.
The legal status of bitcoin trading and ownership varies across Asian jurisdictions, ranging from Japan's relatively liberal regulations to China's outright ban. South Korea, for instance, prohibits spot bitcoin ETFs but offers easy access to bitcoin futures ETFs through local brokers.
South Korea holds a 10% share of the Bitcoin cash tokens and listed futures markets, according to estimates by Hong Song-uk, a cryptocurrency analyst at NH Investment & Securities.
Despite the ban on trading bitcoin ETFs in South Korea, Koreans are increasingly investing in bitcoin ETF futures, contributing to its current popularity, as explained by Hong.
Although Hong Kong has decriminalized crypto trading over the past year and permitted bitcoin ATMs and shops, U.S.-based exchanges such as Coinbase, Bitstamp, and Binance, operating in some Asian markets, still dominate global volumes with a 50% share.
Interest in Bitcoin is also growing in India, where several local crypto exchanges operate legally. However, more trading occurs on offshore exchanges like Binance and KuCoin, which are not subject to the 1% transaction monitoring tax imposed by local operators. Between July 2022 and July 2023, Indians traded crypto worth 350,000 crore rupees through offshore platforms, representing over 90% of the total crypto trading volume by Indians, according to estimates from the Esya Centre, a local think-tank.