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Hong Kong could be a ‘tailwind’ for lagging crypto activity in Asia: Chainalysis

October 3, 2023 Coin Telegraph

chainalysis

Crypto activity in East Asia fell from its perch after China began its crusade against crypto in 2019. Recent moves by Hong Kong could help reverse that trend, said the blockchain analytics firm.

Recent crypto advancements in Hong Kong could provide a “potential tailwind” to lift crypto activity in the East Asian region, which has mainly suffered from a China-wide ban on trading activities since 2019.

Cryptocurrency value received in East Asia amounted to just 8.8% of the world between July 2022 and June 2023, according to an Oct. 2 report from Chainalysis, making it the fifth most active crypto market. However, Chainalysis said Hong Kong’s recent moves could help increase this number.

“A potential tailwind for East Asia comes from Hong Kong, where several crypto initiatives and industry-friendly regulations launched over the past year have fostered bubbling optimism."

Data from Chainalysis reveals that East Asia’s share of crypto transaction value went from around 30% in 2019 to less than 10% by the second quarter of 2022, after a number of crypto-related bans in China.

*Share of cryptocurrency transaction value by region, with Eastern Asia colored in yellow. Source: Chainalysis.*

However, Chainalysis said there is “bubbling optimism” in Hong Kong, noting that despite its much smaller population, Hong Kong is already an “extremely active crypto market” by raw transaction volume.

Between July 2022 and June 2023, the market received an estimated $64 billion in crypto, compared to $86.4 billion in China, despite having a population of just 0.5% the size of the mainland.

In comments to Chainalysis, Merton Lam of CryptoHK, an over-the-counter digital asset trading center in Hong Kong, said that cryptocurrencies are becoming a staple in the investment portfolios of many banks, private equity firms and high-net-worth individuals that they work with within the region.

In addition, Chinese state-owned businesses have also launched cryptocurrency-focused investment funds of late.

That being said, Dave Chapman of digital asset platform OSL Digital Securities told Chainalysis that while digital assets “are not going away” in East Asia — it’s still too early to say whether Hong Kong’s crypto ambitions mean China has fully embraced the cryptocurrency space.

“The promotion of Hong Kong as a potential crypto hub is not necessarily indicative of the Chinese government’s stance on crypto [...] This could be viewed as an exploratory approach to understanding digital assets without loosening mainland policies.”

Speaking to Cointelegraph, Matrixport’s Head of Research and Strategy Markus Thielen said Hong Kong will serve as a “testing ground” for broader cryptocurrency adoption in China.

However, Hong Kong is making a big play in one particular area which other states haven’t managed to capitalize on, says Thielen:

“Crucially, there is a genuine interest to attract the crypto asset management industry which has so far been a missing piece of the puzzle as most crypto firms tend to be labeled as service providers, instead of being the end-user of crypto.”

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US institutions account for 85% of Bitcoin buying in ‘very positive sign’ — Matrixport

January 27, 2023 Coin Telegraph

Aptos

Matrixport’s head of research and strategy suggests the industry will soon see layer 1 and other altcoins outperforming relative to Bitcoin.

Institutional investors are “not giving up on crypto,” with recent data pointing to as much as 85% of Bitcoin buying being the result of American institutional players, according to Matrixport’s chief strategist.

Markus Thielen, the head of research and strategy at the financial services firm, told Cointelegraph the evidence shows that institutions are not “giving up on crypto” and is an indicator that we might be entering a new “crypto bull market now.”

The data was shared in a Jan. 27 report from Matrixport, which suggests that it can be distinguished whether a digital asset is more favorable by retail or institutional investors at any given time based on whether that asset is performing well in the United States or Asian trading hours.

The report stated that if an asset that trades 24 hours “performs well” during U.S. trading hours, it indicates that U.S. institutions are buying it, while an asset that sees growth during Asian trading hours indicates that Asian retail investors are buying it.

The report cited that Bitcoin (BTC) is up 40% this year, with 35% of those returns occurring during U.S. trading hours, meaning there is an “85% contribution” associated with U.S.-based investors, indicating that U.S. institutions are buyers of Bitcoin right now.

Bitcoin Fear and Greed Index is 55 - Greed
Current price: $23,033 pic.twitter.com/OAt0TakkZR
— Bitcoin Fear and Greed Index (@BitcoinFear) January 27, 2023

Thielen added that previous data shows that institutions typically first start buying Bitcoin before investing in other cryptocurrencies. He noted:

“If history is any guide, then we should see the outperformance of layer 1 and altcoins relative to Bitcoin.”

While the report highlighted that news regarding other projects positively impacted token prices such as Lido and Aptos, the crypto rally only started once the U.S. inflation data was released on Jan. 12.

It was also mentioned that Ethereum (ETH) appears to be performing well during U.S. hours, indicating “institutional flows” into the cryptocurrency, however Aptos is doing well around the clock.

“Aptos is seeing a mix of strong returns during U.S. trading hours AND during Asia trading hours.”

The report concluded by stating that this “should be a very positive sign for Bitcoin” as institutional adoption continues.

In earlier comments to Cointelegraph, economist Lyn Alden believes that Bitcoin is currently playing “a bit of catch-up,” getting back to where it would have been without the FTX collapse occurring.

Alden warned that there is “considerable danger ahead” for the second half of 2023, citing liquidity conditions being “good right now” in part because of the U.S as a major factor.

#Bitcoin is a Masterpiece. pic.twitter.com/2rhnCYlkW1
— Michael Saylor⚡️ (@saylor) January 25, 2023

Alden explained that as the U.S. Treasury is drawing down its cash balance to keep the country’s debt levels low, it pushes “liquidity into the financial system.”

Meanwhile, popular trader and market commentator TechDev posted a Twitter update on Jan. 26 showing the price correlation between Bitcoin and Gold, stating that if Bitcoin continues to follow the price of Gold, it might even “crack the $50,000 mark.”

Markus Thielen

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