Abstract : As the rest of the world watches the price of BTC, ETH and other altcoins and trading volumes climb over January and February, one of the influences they are witnessing to these upward prices and volumes is China’s impact on the market, as adopts to current challenges and moves increasingly to a digital economy.
Bitcoin has been trending upwards in January and February. And we have seen similar sharp upwards price movements for ETH and other altcoins. Overseas, many would attribute this to Bitcoin’s halvening coming up in the spring of this year, which will lead to scarcity of Bitcoin mining rewards and has historically correlated to upward price movements. Also, many are encouraged as Ethereum has taken important steps recently to launch Ethereum 2.0, which is Ethereum’s shift from being a Proof of Work (POW) protocol to Proof of Stake (POS). Ethereum will take iterative steps for a long-term transition over the coming few years to change from PoW to eventually fully PoS, or Ethereum 3.0. And as that journey has begun for ETH, we see a corresponding positive market response. The rise of these two coins has influenced price increases for many other altcoins over the past month, as they act as anchors to the overall market.
Yet another influence on the increasing prices is China’s move towards a digital economy. As millions stay at home because of the coronavirus, many people are left with little to do except for looking at their mobile phones. With this free time, many in the blockchain community in China are at home trading (Chaobi). Trading volumes on Huobi and Binance have increased significantly over the past month and spot volumes on global exchanges have increased from $39.83B to $67.53B, a 70% increase from December to January. People are actively trading digital assets, many of them in China during this period where some are quarantined at home. Meanwhile, the A-Share markets have fallen sharply earlier this month. And although the traditional domestic equity and commodity markets have since had positive upward price movements, there are those traders and investors that straddle both traditional equity trading and digital asset trading looking at digital assets as an interesting alternative. This has also led to more domestic activity on digital asset markets.
Now we see online conferencing platforms, such as Zoom and enterprise communication platforms like DingTalk becoming increasingly utilized in business, as people are forced to conduct meetings online instead of the traditional face-to-face format. In the West, people are comfortable having meetings over conference call and communicating in detail through emails, remotely from each other. Yet the interpersonal nature of Chinese business which typically involves face-to-face business meetings and meals, is now going digital. To the extent Chinese people become more comfortable with this format, it could lead to more efficiencies in the market as people can conduct business online, without having to get caught in traffic jams moving physically from one meeting to another. We see similar trends in China for online education and other mobile ecommerce. During the Chinese New Year, Meituan Mecau reported daily sales growth of 2 to 3 times in Beijing and JD.com sales of certain food related products have increased by many multiples over last year’s numbers.
Even the decentralized model of blockchain is being proven out. Companies like Huobi are operating in a decentralized manner as many employees are working from home during this coronavirus outbreak. For many of the smaller blockchain companies, working in a decentralized manner has been the common form for many years. Now other sectors outside of blockchain in China are finding ways to operate with a decentralized team, just like our blockchain community has already become accustom.
As we look for positive aspects of the difficult period in China, it is clear that China is moving even faster towards becoming a digital economy. So long as the internet network connects us, tens of millions of people are modifying their approach to conducting their lives and business, and this is driving the domestic economy even faster forward towards a digital format. And as the rest of the world watches the price of BTC, ETH and other altcoins and trading volumes climb over January and February, one of the influences they are witnessing to these upward prices and volumes is China’s impact on the market, as adopts to current challenges and moves increasingly to a digital economy.
DD Blog Author: Dr. Omer Ozden is CEO of RockTree Capital and RockTree LEX, International Partner of ZhenFund, China’s top Angel investment fund. Dr. Omer Ozden is an international securities lawyer and former Partner with Baker & McKenzie LLP in New York and associate with Morrison & Foerster LLP in Hong Kong.