Since there is no pricing law for Bitcoin, Japan’s FSA is debating restrictions on leverage – Bitcoin News Finance
The different prices for Bitcoin and other cryptocurrencies between countries and exchanges have led investors to look for arbitrage opportunities, a trend that is being noticed by financial regulators around the world. Discussions on limiting leverage are currently underway at the Japanese financial services agency.
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Bitcoin’s value increases 10% after being sent to another location
Cryptocurrencies are traded at different prices in many countries. For example, the value of BTC in Zimbabwe is currently 80% higher than in Japan. Hyperinflation popularized Bitcoin in the African country because many of its residents do not trust their own fiat currency.
In the stock markets, investors cannot use arbitrage because each stock has only one price at a time. However, digital currencies like Bitcoin are financial products that contradict the law of universal price. The change in the price of cryptocurrency occurs not only across borders, but also within borders between crypto exchanges. Arbitrage is an activity that is exploited by cryptocurrency traders who detect these price changes in order to make a profit.
The price of BTC in South Korea is relatively high compared to other markets. The loophole is known as “Kimchi Premium”. When the price of Bitcoin fell last January, 1 BTC in South Korea was worth about 2 million yen ($ 18,200) and about 2.6 million yen ($ 23,600). Back then it was a “kimchi premium” of 30%. Sometimes the premium should even have been up to 50%.
Nikkei shared the story of a Korean man in his twenties who worked in Japan and made a profit on Bitcoin in May 2017 when he repaid about 500,000 yen ($ 4,500 US) of BTC to a friend at home because of the transaction fees were cheaper this way. The price of BTC in Korean won was 10% higher than in Japanese yen. The man told Nikkei that he couldn’t believe his value would go up 10% “just by sending him to another country”.
FSA research group debates leverage restrictions
The South Korean man and his friend reportedly developed an automated trading robot that made a profit of several hundred thousand yen in the first month. The men raised 100 million yen from investors and started a crypto asset management company in January 2018.
According to Nikkei, they operate around nine crypto exchanges in Japan and South Korea and charge fees of around 10% per month. The value of BTC on six digital forex exchanges in Japan, including Bitflyer and Bitbank, reportedly hovered up to 1,600 yen ($ 15) in May.
Meanwhile, members of a research group set up by Japan’s financial services agency this spring have begun to debate leverage limitations as digital currency users are able to speculate with large leverage. In the US, the Federal Reserve Bank of New York also has problems with distorted prices.
According to Nikkei, investments in cryptocurrencies have grown to around 70 trillion yen and around 3.6 million traders a year, mostly private investors. Since the prices of cryptocurrencies vary widely even within a country, it is believed that despite their popularity observed in recent months, they are not yet ready for financial transactions.
Do you expect the price differentials between trading platforms and crypto markets to narrow over time? Share your thoughts in the comments below.
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Arbitrage, Bitbank, Bitcoin, BitFlyer, BTC, Crypto Exchanges, Crypto Investors, Crypto Markets, FSA, Japan, Japanese Yen, Leverage, N Markets and Prices, South Korea, Zimbabwe