The need for regulation is a common topic in discussions about cryptocurrency, and the claim is often considered self-evident. Now, financial services company New York Digital Investment Group (NYDIG) has done some numbers to prove the point. In a new study, NYDIG quantifies the impact of regulation on the price of Bitcoin (BTC) globally.
NYDIG studied Bitcoin prices at regular intervals after regulatory events affecting digital assets taxation, accounting and payments, as well as decisions about the legality of service providers and the digital assets themselves. The research looked at the Americas, Europe, China and Asia in addition to China, and limited itself to the period between September 30, 2011 and March 31, 2022.
The number of regulatory events considered in the study varied between 17 in the Americas and ten in China. With the exception of China, Bitcoin price increases were seen in absolute terms at all intervals and in all regions after a regulatory event, with prices jumping above 100% in all cases in 365 days.
Data related to “average Bitcoin return” showed similar trends, albeit less sharply. In America, Bitcoin prices rose 160.4% in absolute terms 365 days after regulatory events, and 32.3% in relative terms. In Europe, those figures were 180.1% and 52.0%, respectively. In Asia excluding China, the figures were 116.9% and -11.2%, however.
China was the exception that proved the rule. The authors called regulation in China “existing,” noting that the Chinese government has gradually imposed bans on mining and trading of digital assets. Therefore, the negative impact of regulation they found on Bitcoin prices in China was also a demonstration of the impact of regulation.
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The authors conclude, “The results of the study are clear. Both on an absolute as well as relative basis, increasing regulatory clarity is advantageous for the price of bitcoin. Then they 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 impact of regulation because there are many factors influencing price at any given time.”
However, the authors express confidence that, due to the scope of their sampling, “the effects of this noise are somewhat negated” in their findings.