Crypto Takes China by Storm: What’s Next? – Cryptopolite

The crypto market is set to undergo a major shift, with Hong Kong opening the door to crypto trading for retail investors. As I reported on February 21, China is quietly encouraging the move, using Hong Kong as a testing ground for what secure crypto trading might look like.

This move marks a stark contrast to the enforcement approach taken by the SEC in the US recently, which risks stifling innovation and driving crypto businesses out of the country.

By embracing crypto firms with open arms, Asian nations are preparing to lead the next crypto revolution. The move could prove to be the impetus needed to boost the value of cryptocurrencies, with some speculating that a bull market has already begun, spurred by a surge in tokens with ties to Asia. Nevertheless, the figures belie expectations of an Asian-led market boom.

Rejects the China-led market rally

So far in 2023, most of the high trading hours for Bitcoin (BTC) have occurred during US trading hours, suggesting that the West is now driving the cryptocurrency industry’s most important asset.

Interestingly, the 2021 trend was not as pronounced as usual since China did not ban crypto trading until late that year. South Korea’s reputation for investing in cutting-edge technologies has made it a hub for altcoin trading in the area.

Still, the data shows that the market has not been driven by activity in Asia when considering the larger market dynamics across all tokens and exchanges.

Since China banned cryptocurrencies at the end of 2021, Binance has extended its volume leadership over Asian exchanges. It makes sense for Asian markets, not just Hong Kong, to welcome investors back.

Hong Kong Regulatory Guidelines

The Securities and Futures Commission (SFC) in Hong Kong has issued some important warnings for ordinary people considering buying cryptocurrency.

They have dropped hints that they will only trade a subset of the largest coins, which should be included in at least two verified references.

What big cap means and which indices will be sanctioned is still up in the air. Nevertheless, the rules help to reduce the number of possible tokens.

As the year has gone by, the amount of tokens associated with Asian cryptocurrency initiatives has lagged well behind that of Bitcoin. Nevertheless, certain tokens are included in three or four of the five indices.

These tokens include Bitcoin Cash, Litecoin and Polkadot. Caution is warranted as not all of these tokens are likely to trade as actively as major assets.

The market value of a token by itself is an insufficient statistic to assess its value; additional measures, especially liquidity, must be taken into account.

In conventional finance, index creation often takes liquidity into account; the cryptocurrency space should do the same. There must be a more robust method for index creation that takes into account liquidity in addition to market value.

Hong Kong’s decision to let individual investors into the cryptocurrency market, with China working behind the scenes, is a big deal for the sector.

This change has more exciting long-term market dynamics, and when the more welcoming legislation comes into place, a small number of tokens may experience an influx of new capital.