Japan data shows Bitcoin’s volatility follows a pattern

Japanese researchers say they have identified early warning signs of crypto price fluctuations by using AI to analyze blockchain transaction networks rather than traditional market data.

Bitcoin’s volatile price swings have been blamed on a combination of hype, monetary policy, and the notorious four-year ‘halving’ schedule. But a group of academics and analysts in Japan believe they’ve figured out how to detect the signs within blockchain infrastructure before prices plummet.

It’s a finding that could reshape how regulators, crypto exchanges, and investors think about risk in a market characterized by extreme volatility.

Japanese companies expand bitcoin treasuries

In Japan, bitcoin is creeping into corporate investment portfolios and now serves as a long term asset.

The publicly listed trading house ANAP went on a bitcoin shopping spree on December 24 and 25, purchasing 109.3551 BTC valued at 1.5 billion JPY ($10 million). It’s been actively promoting crypto assets as a credible business strategy.

The purchase brings ANAP Holding’s total bitcoin holdings to 1,346.5856, worth approximately $85 million.

“Many companies will see the benefits of holding Bitcoin three to five years from now, and by then, it may already be too late. That’s why we encourage companies to start preparing now,” said ANAP CEO Rintao Kawai at the recent Bitcoin Tokyo Conference.

The publicly listed Metaplanet has also become one of Japan’s largest corporate holders of crypto. It has scaled back its original real estate and retail business to focus solely on accumulating bitcoin. It currently holds approximately 30,823 BTC on its balance sheet.

The signs are on the blockchain

The rise of corporate bitcoin holdings in Japan has turned attention to whether price swings can be anticipated before they strike.

In a new study, researchers in Japan say they’ve found evidence that subtle but measurable changes in blockchain transaction networks set the scene for dramatic shifts in crypto prices.

The Japanese government-backed think tank, the Research Institute of Economy, Trade and Industry’s (RIETI) latest paper, identifies precursors to price fluctuations by isolating ‘influential’ nodes that contribute most to the price anomaly.

These nodes are specific wallets within the blockchain transaction network that had the greatest impact on a price surge or market abnormalities.

Crypto cold feet

In October, bitcoin reached a record high of $125,000. The figure then fell to $110,000 at the start of November, erasing a whopping 16.23% of its value. It’s the second worst fall in value after February’s 17.39% decline.

Crypto prices differ from bonds and equities as they don’t have a theoretical value. Experts believe that price volatility is often influenced by market psychology and expectations.

“Bitcoin reacts less to its own fundamentals. It often acts like a mirror of global anxiety and reacts to stress in the real economy,” explained Rakuten Wallet’s senior analyst Yasuo Matsuda.

The latest study by Japanese researchers challenges common narratives around halving.

“The impact of halving is easing and price movements are driven more by demand and liquidity than by the Bitcoin-embedded supply cuts,” adds Matsuda.

Cornell University economist Eswar Prasad told CNN that retail investors are torn between fear of missing out and a concern over crypto’s price plummeting.

He said price swings are not driven by long term core believers. It’s led by short term crowd behaviour. When prices stop rising, many ‘opportunistic’ investors quickly leave.

It’s a view echoed by Rintaro Kawai, CEO of ANAP Holdings.

“We often see companies buy Bitcoin, only to exit later due to falling prices or pressure from stakeholders. In the end, it gets written off as a loss, which is extremely wasteful.”

In fact, analysts and investors look at bitcoin sell-offs as a sign of impending changes in traditional financial markets.

“Bitcoin is the first asset investors sell when markets turn defensive. Its volatility makes it a natural early warning signal,” said Matsuda.

Crypto markets are shaped by ‘fleeting’ traders who occupy the periphery of the blockchain network.

The goal of Japan’s AI blockchain-based detection method is to monitor for these ‘abnormal’ wallets on the chain that amplify bitcoin’s pattern of boom and bust.