With the exponential price surge in bitcoin in this past month, a new analysis released by Deutsche Bank reveals some interesting stats. In the report by Masao Muraki, Deutsche Bank believes “Japanese men in their 30s and 40s who are engaged in leveraged FX trading (or who used to trade but have stopped) are driving the cryptocurrency market

From the Report:

The identity of who is propping up the Bitcoin market

1. 40% of cryptocurrency trading is Japanese yen-denominated

An 11 December Nikkei report stated that 40% of cryptocurrency trading in Oct-Nov was yen-denominated. Japanese traders have reportedly come to account for nearly half of cryptocurrency trading since China started to shut down cryptocurrency exchanges, and this is said to be widely known among industry insiders (various estimates exist). This report shows that Japanese men in their 30s and 40s who are engaged in leveraged FX trading (or who used to trade but have stopped) are driving the cryptocurrency market.

2. The true face of investors engaged in leveraged FX trading

“Mrs. Watanabe” is a buzzword often used by US/European media and market participants to symbolize the typical Japanese retail investor who trades in FX. Following Abe and Kuroda, Watanabe may be the most famous Japanese name among market participants (although the purported creator of Bitcoin, Satoshi Nakamoto, is also famous). Japan accounts for a high 54% of global foreign exchange margin trading (leveraged FX trading) (source: Forex Magnate, 1Q2017), so Japanese retail investors are major players in FX markets. Data from GMO Click Securities which is the top company in its industry indicates that men hold 79% of FX trading accounts, and 63% of these men are aged 30-49 (as of end-September 2017; Figures 3-4). The typical Japanese leveraged FX trader is thus a man in his 30s or 40s and really ought to be called “Mr. Watanabe”.

As the speculative frenzy over cryptocurrency heightens, the spotlight is falling on the unique characteristics of Japanese retail investors. The Nikkei report mentioned above cited an example of a 38-year-old business man who invested ¥8m ($70,000) in Bitcoin, including his bonus. The average household income of a 38-year-old is about ¥6.1m, the average savings are ¥5m, and the average borrowings are ¥8.8m. This report was also a topic of conversation among the managers of Japanese financial institutions that I visited this week.

3. Financial literacy

How much financial literacy do retail investors engaged in leveraged FX/cryptocurrency trading possess? According to a survey by the Central Council for Financial Services Information (the Bank of Japan), Japanese retail investors are less financially literate than their US peers across all age groups (Figure 6). Compared to the US, financial literacy is particularly poor among people 35-54 years of age. The poor literacy of Japanese retail investors also stands out beside UK and German investors (Figure 7).


Before the FSA started applying pressure, the core investment products sold by banks and brokers were investment trusts with distribution yields above 10% (products with yields above 20% were particularly popular) that took compound risks and drew down principal (the typical purchase commission was above 3% and annual management fees were over 2%).

Figure 8 shows the top 3 reasons that Japanese retail investors engage in leveraged FX trading: 1) expectations of high returns, 2) they can easily invest in foreign currencies, and 3) many investors are earning profits. However Figure 9 shows that most investors say they quit leveraged FX trading because they did not do well (only 7.5% said they realized their profit goals).

The questiion now becomes who takes the torch and pushes the price to $100,000k?

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