Data Shows US Dollar, Not Japanese Yen, Is Dominating Bitcoin Trade

A deep dive by CoinDesk has found methodological flaws in widely-cited bitcoin exchange data that appear to overstate the importance of the Japanese yen as a trading pair.

Our analysis of trading data collected from July 26-30 suggests that the U.S. dollar, not the yen, is the dominant currency traded for bitcoin by a wide margin.

Currently, analytics sites CryptoCompare and Coinhills offer a breakdown of bitcoin trading by currency pair, and until recently the data from both sites indicated that over 50 percent of bitcoin trading is denominated in Japanese yen.

The problem is that the vast majority of yen-denominated transactions are not "Spot" trades of actual bitcoin for yen.

As a result, the yen and dollar totals were not an apples-to-apples comparison, since the former includes derivative trades and the latter does not.

Bitflyer handles both spot trades and derivative trades, but it is the sheer scale of these derivatives trades that can distort market data.

These derivative trades accounted for 90% of CryptoCompare's observed yen trading and 85% of Coinhills' yen trading.

To create a more balanced comparison of global trading activity, CoinDesk took a snapshot of both the spot market, which excludes all derivative trading, and the total market, which includes all spot trading and the dollar and yen volume at the four major derivative exchanges: Bitflyer's Lightning FX, Bitmex, CME and Cboe.

In CoinDesk's apples-to-apples snapshot, by contrast, the dollar makes up 56 percent of spot market trading and 68 percent of total trading when including major global derivative markets.

Japanese officials have thus far led the push for global cryptocurrency AML standards in international forums like the G20 and the Financial Action Task Force, but continued dollar dominance of cryptocurrency trading could inspire a more active U.S. presence.