NYDIG reviewed Bitcoin prices at intervals after different regulatory events and discovered undisputable evidence of the events’ effects.
The need for defined and adequate regulation is a common theme in discussions about Crypto, and the allegation is mostly taken to be self-evident. Now, financial services firm New York Digital Investment Group (NYDIG) has done some number crunching to prove this point. In a new study, NYDIG has quantified the effect of regulation on the price of Bitcoin globally.
NYDIG studied Bitcoin prices at regular intervals after regulatory events that affect digital asset taxation, accounting, payments, and decisions targeting the legality of service providers and the digital assets themselves. The study focused on Europe, the Americas, China, and Asia except for China, and confined itself to the period starting from September 30, 2011, to March 31, 2022.
The number of regulatory events covered in this study varied between 17 in the Americas and 10 in China. Except for China, Bitcoin price surges were seen in absolute terms at all these intervals and in all regions after a regulatory event, with the prices spiking by more than 100% in all cases in 365 days.
Data relative to “average Bitcoin return” indicated similar trends, although less steeply. In the Americas region, Bitcoin prices surged by 160.4% in absolute terms 365 days after regulatory events, and 32.3% in relative terms. On the other hand in Europe, these figures came in at 180.1% and 52.0%, respectively. In Asia except for China, these figures stood at 116.9% and -11.2%.
China was the exception that proved the rule. The authors of this report termed regulations in China “existential,” noting that Beijing slowly imposed bans on the mining and trading of digital assets. Thus, the negative effect of the regulation they found on Bitcoin prices in China was also considerable evidence of the effect of the set regulation.
The authors concluded:
“The results of the study are clear. Both on an absolute basis as well as [a] relative basis, increasing regulatory clarity is advantageous for the price of Bitcoin.”
Then they moderated their language almost instantly, 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 as there are myriad factors impacting price at any given time.”
Nevertheless, the authors expressed confidence that, due to the scope of their sampling, “the effects of this noise are somewhat canceled out” in their findings.