The need for regulation is a common theme in cryptocurrency debates, and the claim is often considered self-evident. Now, the financial services firm New York Digital Investment Group (NYDIG) has done some math to prove it. In a new study, NYDIG quantifies the effect of regulation on the price of Bitcoin (BTC) around the world.
NYDIG studied Bitcoin prices at regular intervals following regulatory developments affecting the taxation, accounting, and payments of digital assets, as well as decisions about the legality of service providers and the digital assets themselves. The research examined the Americas, Europe, China, and Asia excluding China, and was limited to the period from September 30, 2011, to March 31, 2022.
The number of regulatory events considered in the study ranged from 17 in America to 10 in China. With the exception of China, Bitcoin price increases in absolute terms were observed in all intervals and in all regions after a regulatory event, with prices jumping more than 100% in all cases in 365 days.
The data regarding the “average return of Bitcoin” showed similar trends, although less pronounced. In America, Bitcoin prices are up 160.4% in absolute terms 365 days after the regulatory events, and 32.3% in relative terms. In Europe, those figures were 180.1% and 52.0%, respectively. However, in Asia, excluding China, the figures were 116.9% and -11.2%.
China is the exception that confirms the rule. The authors called regulation in China “existential,” noting that the Chinese government gradually imposed bans on digital asset mining and speculation. Therefore, the negative impact of regulation they found on Bitcoin prices in China was also evidence of the effect of regulation.
The authors conclude: “The results of the study are clear. In both absolute and relative terms, increased regulatory clarity is advantageous for the price of Bitcoin.” They then moderate their language almost immediately, writing:
“The implication is that regulatory clarity, while not always perfect, is appreciated by investors. It is worth noting that it is impossible to directly observe the effect of regulation, since there are a myriad of factors that influence price in a market. Given moment”.
However, the authors express confidence that, due to the scope of their sampling, “the effects of this noise are somewhat cancelled” in their conclusions.
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