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Banking & Finance

'Mr. Watanabe' hit hard by bitcoin crash, but not losing heart

Japanese retail investors play growing role in the virtual currency market

  © Reuters

TOKYO -- Bitcoin plunged last week, giving up 40% of its value from a record high of $19,783 per unit on Dec. 17. The selloff was exacerbated by retail investors in Japan, many of them leveraged, as they rushed to dump their holdings in a panic.

Curiously, though, it was the same bruised bunch who helped buoy the cyptocurrency after the selling had run its course. Given their growing influence, such investors are becoming known as "Mr. Watanabe," a variation of their relatives in the foreign-exchange market known as "Mrs. Watanabe."

Many in the bitcoin market believe Mrs. Watanabe has become so used to leveraged foreign-exchange trading that some made their way into the bitcoin market, pushing up the price. According to foreign-exchange and virtual currency information website Finance Magnates, Mrs. Watanabe accounted for over 40% of leveraged currency trading around the world in the first three months of 2017.

Thanks partly to Mr. Watanabe, bitcoin volatility has subsided for now. After falling below $11,000 late Friday, the virtual currency has recovered some of its lost ground, trading above $17,000 in Asia on Wednesday, according to data provider CoinDesk.

It should be noted, however, that many of the Mr. Watanabes who sold bitcoin amid Friday's crash had only started trading a few months earlier. They bought into bitcoin on leverage, hoping to make money after seeing the cryptocurrency easily surpass the $10,000 mark to chase higher prices. Their average purchase price was already high, so they could not tolerate the sudden fall as the trend reversed.

Most Mr. Watanabes, however, were not perturbed. Since their bitcoin was worth less than $5,000 when they bought it in the first half of 2017, prices around $10,000 still yielded handsome profits.

"A dip in the price is a great opportunity to buy," said a salesperson at a virtual currency exchange in Japan.

In fact, some bitcoin investors in Japan rejoiced when the currency crashed late Friday.

"What a huge bargain!" tweeted one.

According to data provider Coinhills, bitcoin trading in yen surged to around 49% on Monday from around 40%, suggesting how big the role of Mr. Watanabe was in propping up bitcoin by taking advantage of sudden dips.

"Next year, once we see progress in issues related to transactions, the price of bitcoin will continue to climb higher in the long term," predicts Shuhei Fujise, chief analyst at Alt Design, a Tokyo-based virtual currency research company.

Bitcoin futures are now traded on the Chicago Mercantile Exchange and the Chicago Board Options Exchange, allowing speculators such as hedge funds to sell the currency in bulk.

On Friday, for example, when bitcoin tumbled, some commodity trading advisers had been betting on bitcoin's fall. If Mr. Watanabe succumbs to such moves, bitcoin may fall further. But for the time being, the bitcoin craze appears to be maintaining its momentum.

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