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Here's who may be behind bitcoin's wild surge: Japanese men

  • Deutsche Bank's Masao Muraki notes that, for the most part, retail investors in leveraged FX trading fail to meet their profit goals, thus shifting their focus to "leveraged cryptocurrency trading."
  • Cryptocurrencies, especially bitcoin, have been on fire this year.
  • Muraki said that "speculation in cryptocurrency is growing to a scale that cannot be ignored."

Japanese men may be the driving force of bitcoin's wild surge, a strategist at Deutsche Bank said Thursday.

Masao Muraki, a global financial strategist at Deutsche Bank, said retail investors who had been borrowing money to trade foreign currencies haven't been profiting on those trades and have shifted their focus to cryptocurrency trading on borrowed money instead.

"We think that retail investors are shifting from leveraged FX trading to leveraged cryptocurrency trading," Muraki said in a note. "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."

In Japan, 79 percent of FX trading accounts are held by men, and 63 percent of them are ages 30 to 49, the strategist said, citing data from GMO Click Securities. Japan accounts for 54 percent of global foreign exchange margin trading, he added.

Japanese news outlet Nikkei reported earlier this week that 42 percent of October bitcoin transactions were made in yen. The same report gave an example of a 38-year-old businessman who invested 8 million yen ($70,000) in bitcoin, including his bonus. That is almost the entire average household income of a man his age, 6.1 million yen, Nikkei reported, and the average borrowing is 8.8 million yen.

"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," Muraki said.

Cryptocurrencies, especially bitcoin, have been on fire this year. Since Jan. 1, bitcoin has surged more than 1,500 percent. On Thursday, it traded at $16,341.50, according to CoinDesk's bitcoin price index.

But the sharp rally has raised concerns that a bubble may have formed. UBS Wealth Management, for example, said earlier this week that cryptocurrencies such as bitcoin are "the bubble to end all bubbles."

Deutsche's Muraki also said that "speculation in cryptocurrency is growing to a scale that cannot be ignored."

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