Japan's army of retail investors, no strangers to high-risk bets in the past, have emerged as a major force in bitcoin's spectacular rally, now accounting for an estimated 30-50 percent of trading in the cryptocurrency as it spikes to record highs. Once sceptics, Japanese retail investors have been attracted by the digital currency's volatility and inefficiencies in pricing that create opportunities to make money on arbitrage between exchanges. "When I first heard about the bitcoin a few years ago, I thought it was a fraud," said Yoshinori Kobayashi, 39, a former stock trader who took up bitcoin trading two-and-a-half years ago. "But I tried it out after I had come to know some people making money on it. I bought it at 60,000 yen, which quickly become 80,000 yen and I started to regret I hadn't started earlier," said Kobayashi, who believes bitcoin is on a long uptrend but took some profits last week. The spectacular surge in bitcoin, up more than 16-fold this year to above $17,000, has drawn comparisons to the 1970s gold spike or Japanese shares' rally in the 1980s' go-go era. Both of those delivered massive gains to Japanese retail investors before plunging sharply. Statistics on bitcoin and crypto-currencies are patchy because their trading is unregulated in most countries. According to data compiled by Jpbitcoin.com, a Japanese bitcoin website, yen-based bitcoin trades reached a record 4.51 million bitcoins in November, almost a half of the total of the world's major exchanges of 9.29 million bitcoin. Industry officials say not all yen-based bitcoin trading is done by Japanese retail players as some hedge funds now trade bitcoin in the yen to take advantage of price differentials between the yen and dollar prices. Still, many industry officials estimate Japanese account for somewhere between a third and half of global bitcoin trade. Japan's global share of the bitcoin market jumped after a clampdown this year by Beijing saw bitcoin trading in yuan almost entirely disappear. South Korea, another key centre for bitcoin trade, said it would hold an emergency meeting on Friday to discuss the trading of cryptocurrencies amid calls for tighter regulation. VALIDITY AND VOLATILITY Japan's approach to bitcoin has encouraged retail investor interest. The Japanese government in April granted cryptocurrencies legal status as a means of settlement and in September officially recognised 11 digital currencies exchanges. Also in September, the tax agency issued clarification that revenues from bitcoin will be treated as income, from which trading losses can be deducted. That eased concerns that profits from bitcoin might be taxed like gambling, where gains will be taxed but losses will not be regarded as costs. Some investors including Kobayashi also feel affinity to bitcoin partly because its inventor, Satoshi Nakamoto, is said to be Japanese, though the true identity of the father of the blockchain technology is shrouded in mystery. Trading at Japanese major bitcoin exchanges grew to 4.51 million bitcoin in November from 1.19 million in April. In dollar terms, it has surged to $35.4 billion in November from $1.45 billion in April. A lack of major institutional investors is providing retail investors with\u00a0a rare chance to become dominant players, with primitive pricing leaving opportunities for savvy traders, market participants say. Even within dollar based exchanges, it is not uncommon to see a price in one exchange 10 percent higher than another exchange, for example. Then there are often gaps of more than 10 percent between yen-based bitcoin price and dollar-based price. "Most Japanese traders don't even bother to check the dollar price," said a veteran financial trader, who started bitcoin in September. TEXTBOOK CASE The trader also said bitcoin's moves after it rose above 100,000 yen ($880) are very similar to what happened in a big rally in gold and silver in the past. "They both rallied very quickly after having broken out many years of range-bound trading," he said. Indeed, many traders say technical analysis works remarkably well when it comes to bitcoin. Hiroyuki Kato has traded cryptocurrencies for two years, spending two to three hours a day studying the patterns and ratios popular in technical analysis on his smartphone or computer terminal. "I use Bollinger Band, MACD, the stuff everyone knows. It's easier to win in bitcoin than in FX and stocks," said Kato, who quit his sales job at a trading firm about two years ago to focus on trading cryptocurrencies and other assets. Among some financial professionals, there is growing talk that the meteoric rise in bitcoin resembles the "tulip mania" bubble in the Netherlands in the 17th century that burst spectacularly. However, many Japanese traders expect bitcoin's stellar run to continue for some time yet. "The world's total financial assets is around 10 quadrillion yen, and bitcoin is only just about 0.1 percent of that, which seems way too small if we assume the use of bitcoin spreads," Kobayashi said. Bitcoin's net worth could reach about 10 percent of the world's assets, about 100 times its size today, Kobayashi reckons. Kato believes the digital currency is already in a bubble but still expects the start of futures trading on the Chicago Merchantile Exchange next week to attract more funds from institutional investors and push up bitcoin prices further. A major burst could happen in 2019, Kato says, but not until factors including low interest rates and the deep doubts harboured by many change. "At the moment, many people are still sceptical about bitcoins and when many are sceptical, there won't be a burst of the bubble."