Bitcoins can be earned either by mining them, or by receiving them as payment for providing goods or services, or by exchanging them against fiat currencies (like the U.S. dollar or the Japanese yen) or against other cryptocurrencies (like ETH). We examine the top fiat currencies that are used to trade in bitcoins.

Rapidly changing bitcoin valuations have fueled a high volume of speculative trading activity around the globe. Many people who trust the blockchain technology and the monetary ecosystem based on bitcoin are purchasing the virtual currency as a long-term investments.

Increasing acceptance by all genres of businesses – from local coffee shops to large corporations like Dell and Microsoft – may help fuel the adoption of the virtual currency. (For more, see Stores Where You Can Buy Things With Bitcoins.)

Before making a purchase, some people may compare whether they are better off paying for an item in fiat currencies or in bitcoins. (See also: Arizona Votes to Accept Tax Payments in Bitcoin.)

Fiat Currencies That Top Bitcoin Trades

Coinhills provides a list of the most traded national currencies for trading bitcoins based on information from currencies, markets and exchanges registered at Coinhills. Data are available on the portal as of mid-February 2018, based on more than 120 exchanges and more than 11,500 markets registered on Coinhills.

1. Japanese Yen (JPY)

With a 60% market share, the Japanese yen leads the pack of fiat currencies used for dealing in bitcoins. Japan has been a leader for the last few years, and its lead has been extended because of the mutiple bans imposed by the Chinese government on China-based bitcoin exchanges since September 2017. All those bitcoin trading activities from China swiftly moved to Japan and Hong Kong, with Japan being the biggest beneficiary of the Chinese ban. (See also: China's Cryptocurrencies Have Gone Underground.)

Japanese regulators have been among the earliest adopters and among the most accommodating of the virtual currency. They have been very proactive in putting up the necessary regulations, and have promptly streamlined bitcoin trading, enabling it to gain the lion’s share of the global market. In September 2017, the country’s Financial Services Agency (FSA) issued operating licenses to 11 bitcoin exchanges, giving a further boost to trading bitcoins in Japanese yen.

2. U.S. Dollar (USD)

The American dollar currently ranks second on the list of fiat currencies trading bitcoins, with around 25% of the market share. The greenback was the top ranker in 2012, but was pushed to second place by the Chinese yuan in 2014 as Chinese participation in cryptocurrency dealing increased. Though Japan surged ahead of both China and the United States, the U.S. dollar maintains a consistent rank among the top fiat currencies for trading bitcoins.

The consistent top rank of the U.S. dollar in bitcoin dealing is because of several factors.

Being a quick adopter of any new technology, the U.S. found a large user base in the blockchain-based Bitcoin that quickly gained traction in the country. While bulk of the other nations and their regulators were sitting unaware on the bitcoin development, the enthusiast residents of these countries started trading and investments in bitcoins through the most popular currency of the world. For example, in populous country like India, individuals who are holding bitcoins directly, or through intermediaries, have bought it by first converting the India rupees to U.S. dollars and they using the dollars to purchase the bitcoins. 

3. Korean won (KRW)

As of February 2018, the South Korean won ranks a distant third on the list, with a market share of only around 6.5%. The share of KRW in bitcoin trading has declined significantly since January 2018 as the country's regulators announced a ban on cryptocurrency traders in Korea from using anonymous bank accounts.

The country's finance minister, Mr. Kim Dong-yeon, recently mentioned that “there is no intention to ban or suppress cryptocurrency (market),” indicating that the national currency will continue to see more transactions in legitimate and regulated bitcoin deals. Market expects better regulations in coming times in Korea around bitcoin trading and investments.

4. Euro (EUR)

The common currency of Europe is ranked fourth rank on the list, with a 5.5% market share in trading bitcoins.

Last week, the European Central Bank (ECB) mentioned that it "has no plans to regulate cryptocurrencies like Bitcoin - leading to a surge in its value."

Though the common currency circulating in the vast European region is itself facing survival questions, the popularity of using it for trading bitcoins has remain confined to certain regions. The German city of Berlin remains the Bitcoin capital of Europe, with Netherlands and Belgium seeing a surge in installations of Bitcoin ATMs in last one year. On the other hand, France has announced plans to regulate the cryptocurrency in January, making it an uncertain road for bitcoin adoption in the overall EU region.

Other currencies on the list include the British pound (GBP), the Russian ruble (RUB), the Polish zloty (PLN), the Australian dollar (AUD) and the Turkish lira (TRY) in the given order, though all have under 1% market share in trading bitcoins.

Together, the Japanese yen, the U.S. dollar, and the Korean won comprise around 90% of the fiat currencies used to trade bitcoins on cryptocurrency exchanges around the world.

Surprise! No Yuan?

Interestingly, the Chinese yuan no longer figures in the list of top fiat currencies used to trade bitcoins. Around 2014-15, as the Chinese yuan was devalued, it surged to the top rank beating both the Japanese yen and the U.S. dollar. It maintained its lead till late 2017. However, amid increasing state-imposed regulations and crackdown on illegal bitcoin trade, the dealings has rapidly moved other venues, including Japan and Hong Kong, leaving the yuan out of the top list.

Investing in cryptocurrencies and other Initial Coin Offerings ("ICOs") is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual's situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein.

Want to learn how to invest?

Get a free 10 week email series that will teach you how to start investing.

Delivered twice a week, straight to your inbox.