Japan Crypto Snapshot — Historic High of Open Interests for Margin Trading —

October 2019

By Yuya Hasegawa, a Market Analyst at bitbank, inc..

Quick Take

• MONA’s monthly volume failed to keep third place in October and plunged back to fifth place, which translates to 66.45% drop in monthly volume from the year high.
• The number of ‘active’ accounts for spot trading has been continuing to increase throughout the year. But, it is dubious that it directly leads to the increase of the number of active traders.
• The number of open interests for margin trading hit all time high in October.

Table. 1: Monthly Trade Volumes / Trade Values and Users’ Holding Amount in Japan
*Trade Value = 1 million JPY
*Trade Volume = 1 unit in each cryptocurrency
Source: Japan Virtual Currencies Exchange Association

Table. 2: Monthly Trade volumes / Trade values of Open Interest and the Number of Users’ crypto accounts in Japan
*Trade Value = 1 million JPY
*Trade Volume = 1 unit in each cryptocurrency
Source: Japan Virtual Currencies Exchange Association

Table. 3: Monthly Trade volume / Trade value of BTC in Japan
*Trade Value = 1 million JPY
*Trade Volume = 1 unit in each cryptocurrency
Source: Japan Virtual Currencies Exchange Association

Table. 4: Monthly Trade Volumes / Trade Values of XRP, ETH, BCC・BCH, MONA and LTC in Japan
*Trade Value = 1 million JPY
*Trade Volume = 1 unit in each cryptocurrency
Source: Japan Virtual Currencies Exchange Association

Mona Coin Loses its Shine as the Monthly Volume Experiences 66% Drop from the Year High

As mentioned before, MONA had a dramatic price hike in June for the reason that another Japanese exchange started supporting the coin on their platform. This event also resulted in an increase in the coin’s monthly domestic volume and, for the first time, it became the third most traded cryptocurrency in that month.

However, soon after the 223.64% price hike, which lasted only for a matter of two days, the price started to pull back fairly quickly, spiralling back to the level where the price-hike began, and the volume followed suit. As a result, MONA’s monthly volume failed to keep third place in October and plunged back to fifth place, which translates to 66.45% drop in monthly volume from the year high.

BTC and XRP’s monthly volume kept distinctively higher level than the rest of the coins listed/traded in the country (hence, they had to be plotted on a separate chart).

Fig. 1: Monthly Trade Volumes of BTC and XRP (top) and ETH, BCC (bitcoin cash), MONA, LTC, and Other Altcoins (bottom)
Source: Japan Virtual Currencies Exchange Association

‘Active’ Accounts are not that Active

Although, like MONA, crypto market as a whole has been relatively stagnant since this June, the number of ‘active’ accounts for spot trading has been continuing to increase throughout the year (see Fig. 2). So, does this mean more and more people are trading cryptocurrencies?

Fig. 2: The Number of Monthly Active Accounts (top) and its Monthly Changes (bottom)
Source: Japan Virtual Currencies Exchange Association

The answer is likely to be no.

Since the number of ‘active’ accounts in the JVCEA’s report actually includes inactive accounts with funds in them, even though the total number of accounts has been increasing, it does not necessarily mean more and more users are trading cryptocurrencies. In fact, as can be seen in Fig. 3 and Fig. 4, monthly volumes for most of the cryptocurrencies are on downtrend since around this June, and only BTC and LTC have maintained their monthly volumes above December 2018 levels. So, it is highly likely that the share of inactive accounts has been increasing.

However, there is no way to know how many dormant accounts are out there, so it is impossible to measure the accurate share of active users who frequently trade. Plus, there may be a fair share of HODLers who wish to sell their assets at the highest level as possible and just waiting for the right moment. So, the declining volume does not necessarily mean users are losing their interests in crypto market and it is worth noting that the number of accounts has been continuously increasing almost at a constant rate amid stagnant market environment.

Fig. 3: Monthly Volume of BTC, XRP, ETH, BCC, and others Indexed on Dec. 2018
Source: Japan Virtual Currencies Exchange Association

Fig. 4: Monthly Volume of BTC, XRP, ETH, BCC, MONA, LTC, and others Indexed on Dec. 2018
Source: Japan Virtual Currencies Exchange Association

Long Overwhelms Short

On the other hand, while spot trading volume experiences a slump, the number of open interests for margin trading hit all time high in October. Of course, margin trading lets market participants bet on price depreciation, so the number of open interests should not be affected so much even in case the underlying assets’ price goes down. But this does not quite explain the situation.

As Fig. 5 shows, although the number of short positions has slightly been increasing since this July, the number of long positions has been constantly and significantly higher. Notably, the number of long positions jumped from 122 million to 159 million contracts in October, possibly due to the Chinese president Xi jinping’s remark on blockchain towards the end of the month, which sent the prices of BTC and other major cryptocurrencies to their month highs.

The gap between the number of longs and shorts is, in a way, natural. It is said that retail investors are more familiar with buying financial instruments to gain return rather than to sell them to do so. Still, the gap is quite surprising considering that there is not even swap points for longing cryptocurrencies.

Fig. 5 The Number of Open Interests for Domestic Margin Trading
Source: Japan Virtual Currencies Exchange Association

Fig. 6: Number of Accounts for Domestic Margin Trading
Source: Japan Virtual Currencies Exchange Association

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