Asia Dominates Crypto, But Here’s Why That Could Soon Change

Asia Dominates Crypto, But Here’s Why That Could Soon Change 101
Source: Adobe/valerybrozhinsky

The crypto world’s center of gravity is Asia. Big crypto-exchanges and companies operate in Europe and North America, but the majority of users are located in the Asia Pacific region, as are most of the world’s biggest exchanges and mining pools.

There are many reasons why this is the case. But experts speaking to argue that two reasons, in particular, stand out, namely regulations and existing financial infrastructure.

But there are also other factors at play, such as the fact that Asia benefits from a favorable energy environment for mining, as well as cost-effective IT resources.

However, these same experts suggest that Asian dominance could change soon, as crypto starts to enjoy more mainstream adoption – particularly when one takes into account where the leading cryptoasset and blockchain technology companies are based.

Asian Traders Rule

There is plenty of evidence to suggest that most crypto traders are based in Asia. Recently, DEXTF’s chief scientist wrote about ethereum (ETH) gas prices, which tend to spike during trading hours in much of Asia.

Asia Dominates Crypto, But Here’s Why That Could Soon Change 102
Source: DEXTF/Medium

As the heat map indicates, the gas price begins to hit its peak at UTC+8, a time zone that covers Mainland China, Singapore, Taiwan, and Hong Kong.

According to Binance’s VP of the Asia-Pacific region, Mai Lu, the higher demand for gas from Asian users is likely the result of higher demand for decentralized finance (DeFi).

Mai Lu tells,

“Asia has witnessed an increasing number of blockchain startups and investors entering the market in the past years, with many projects actively working on DeFi products and services on Ethereum, which could be the reason behind the rise of ethereum transaction fees during the daytime in Asia.”

There are other indicators that appear to confirm Asia’s crypto dominance.

CryptoCompare data shows that tether (USDT) accounts for around 57% of the global bitcoin (BTC) market, while USD accounts for 19%, and the Japanese yen accounts for 11%.

Research from Chainalysis has shown that China has the largest number of USDT users and that there are more trades carried out here than in any other nation.

Why is there such high demand for bitcoin among Chinese and other Asian traders?

According to Mai Lu, it is down to demographics and economic factors, including a Chinese yuan that some say has been weakened by international trade disputes.

Mai Lu says,

“If we boil it down, we’ll see user demand is what’s been driving all this behind. Asia features a large population and insufficient financial infrastructure, which has created a huge demand for crypto and contributes to its growth.”

Kunal Barchha, the CEO of India-based exchange CoinRecoil, also believes that population size helps explain why Asia dominates crypto, with sheer numbers playing a role.

Barchha notes,

“Asia is a largely populated space and thus, even a couple of percentage rise in users can show a boost to the overall crypto market.”

Regulation, Mining, IT

Burchha holds that regulation is a big factor in Asia’s position, as does Mai Lu.

“The distribution of crypto traders/users is fundamentally determined by the regulatory environment,” Lu says. “As we can see, the Indian market erupts following the Indian Supreme Court’s overturning the banning on cryptocurrency trading by the country’s central bank.”

According to Lu, this may change in the future, particularly given that the Chinese government has officially banned crypto trading and exchanges.

He explains,

“Many countries in the APAC region are confronted with regulatory uncertainties. While the absence of relevant regulation may nurture innovation for a limited time, it also poses potential threats to the long-term development of the industry.”

Despite the Chinese government’s skeptical attitude towards crypto, bitcoin mining is still dominated by China-based pools. This is largely because of cheaper manufacturing costs in China, as well as lower electricity prices.

According to Barchha, Asian nations such as India also benefit from a favorable IT environment.

He explains,

“IT resources are much cost-effective here. Also, skilled developers, and engineers are plentiful. Down the line, I see Asian countries playing a leading role in new developments pertaining to blockchain and cryptoassets.”

A Chance for Change?

This balance could change in the future. According to Barchha and Lu, Europe and North America lay claim to the most innovative companies in crypto.

“It’s interesting to notice that many influential blockchain projects are rooted in the United States and Europe while most leading crypto exchanges are rooted in APAC,” says Mai Lu.

He adds,

“Blockchain companies in the United States and Europe have the competitive edge in terms of technological development, boasting of many innovative tech teams.”

Barchha also thinks that, because of potentially restrictive laws, Europe and North America may end up leading the way when it comes to the wider adoption of crypto.

Barchha says,

“I believe that Europeans and Americans will lead the adoption side of the market, while Asians will act mostly as traders and investors. That’s because Asian countries may adopt regulations that may not accept crypto as currencies, but as investment assets.”

This will present a barrier for the adoption of crypto for buying goods and services, Barchha predicts. However, he continues to “see Asia playing a vital role in trading markets.”

Regardless of its share, Mai Lu insists that Asia will continue to have a massive influence on how crypto develops around the world.

He concludes,

“The Asian crypto industry will continue to grow and grow exponentially in the long run because the demand side is very high, which in turn will have a phenomenal impact on the global crypto space, drive innovation in the industry, boost massive adoption across the globe and help grow the broader industry.”