NYDIG Study Calculates Global Regulatory Value in Bitcoin Price Gains

The need for regulation is a common theme in discussions about cryptocurrencies, often taken as self-evident. Now, financial services firm New York Digital Investment Group (NYDIG) has done some data analysis to prove it. In a new study, NYDIG quantifies the impact of regulation on the price of Bitcoin.

NYDIG regularly studies Bitcoin prices following regulatory events affecting taxation, accounting and payments of digital assets, as well as decisions regarding the legality of service providers and digital assets themselves. The study looked at the Americas, Europe, China and Asia (excluding China), and limited the study period to September 30, 2011, to March 31, 2022.

The number of regulatory events considered in the study ranged from 17 in the Americas to 10 in China. With the exception of China, all regions saw an absolute increase in bitcoin prices following the regulatory event, with price increases of more than 100% in all cases over a 365-day period in all cases.

Data related to “Bitcoin Average Return” shows a similar trend, though not as pronounced. In the Americas, the Bitcoin price increased by 160.4% in absolute terms and 32.3% in relative terms in the 365 days following the regulatory event. In Europe, the figures are 180.1% and 52.0%, respectively. However, Asia excluding China was 116.9% and -11.2%.

China is the exception that proves this rule. The study’s authors called Chinese regulation “existent,” noting the Chinese government’s gradual ban on the mining and trading of digital assets. Thus, they find that the negative impact of regulation on Bitcoin prices in China is also evidence of regulatory influence.

The authors concluded: “The findings of this study are clear. Increased regulatory transparency is beneficial to the price of Bitcoin, both on an absolute and relative basis.” Then they almost immediately adjusted their wording, writing :

“Meaning, while regulatory transparency isn’t always perfect, investors appreciate it. It’s worth noting that it’s impossible to directly observe the effects of regulation because there are countless factors influencing prices at any one time.”

Nonetheless, the authors say they believe "the effects of other factors are somewhat offset" in their findings due to the size of their sample.