Cryptocurrency, the new asset for investment

stratfor.com

The Covid-19 pandemic has undoubtedly caused a huge disruption in the economy, businesses, and even daily life activities. Many suffered pay cuts, had to hold back operations or even resorted to shut doors for good.

Contrastingly, a recent survey conducted by Personal Wealth, titled Spending Habits During The Movement Control Order (MCO) reveals that Malaysians still utilised the money they had in investment.

The survey was conducted from June 11 to 19 with 619 respondents of various income levels. The respondents were from 25 to 54 years old, where 42.8 percent (25-34), 29.4 percent (35-44), and 12.4 percent (45-54).

According to the survey, 82.4 percent of respondents kept aside their money to invest during the MCO period; in stock market (56.9 percent), fixed deposits (47.5 percent), exchange-traded funds via robo-advisors (13.6 percent), peer-to-peer financing platforms (5.3 percent) and cryptocurrencies (3.1 percent).

Global perspective shows that the pandemic encouraged investors to review the long-term outlook for bitcoin and other cryptocurrencies such as Ethereum, Litecoin and XRP, which have all increased in value in recent months.

Notably, the world’s best known cryptocurrency, bitcoin jumped above US$17,000 to a three-year high in November as a growing number of investors backed it as an alternative to other assets.

The currency climbed more than four percent to US$17,492, its highest level since December 2017 and more than four times higher than the price in March when heavy selling sent its value below US$4,000.

BusinessToday spoke to Aaron Tang, the Country Manager for Luno Malaysia to get a better insight into investing in cryptocurrencies, especially for Malaysia.

“Cryptocurrencies are a new form of digital assets, hence they’re very different from other established assets like stocks, bonds, and gold.

In terms of market size, research has shown that the entire market capitalisation of cryptocurrencies is only about US$500 billion. Gold is estimated to have a market capitalisation of about US$9 trillion, while the total market capitalisation of stock markets around the world is above US$88 trillion.

This shows how early it is for digital assets and there is still room for explosive growth,” Aaron explains.

Luno Malaysia is the largest regulated digital asset exchange (DAX) in Malaysia with a 90 percent local market share and has a total RM165 million crypto holdings on behalf of their customers.

It has a large number of new signups (between 40,000 – 50,000) since it received full approval to operate in Malaysia by the country’s Securities Commission last year and also has a total of more than 180,000 customer base. In recent weeks they have seen a huge spike in signups, and expect this trend to continue.

The DAX has a demographic of 80 percent male and 20 percent female customers, and almost 70 percent of them buy crypto for investment purposes.

“Luno expects to have more female participation in the future because we think that women are still under-represented in the financial sector. We do have some plans to improve this in the future,” Aaron highlights.

Aaron adds that it is also interesting to note that cryptocurrencies have traditionally attracted more interest in emerging markets (for example in Southeast Asia vs Western Europe), and he hopes to grow this percentage rapidly over the coming years in Malaysia.

Safety and security

With advancement in technology and digital, comes a great fear of security, especially where cryptocurrencies are concerned.

Luno uses industry-leading security systems, including the use of multi-layer storage systems and multi-signature schemes. They also work with leading custodians to secure both digital assets and Malaysian ringgit funds. The systems are also audited by world-class security firms.

“To begin with, Luno is the first DAX to be fully regulated in Malaysia. Security of customer assets is a critical priority. We always recommend beginners to invest in cryptocurrency via approved digital asset exchanges, as these platforms need to undergo strict vetting of their security systems by the Securities Commission (SC),” he emphasises.

Aaron then reminds that it is possible to invest in cryptocurrency via platforms that are not approved in Malaysia but this comes with increased risks.

Plans for 2021

Every company has its own sets of goals and objectives prepared for the upcoming year, and Luno has it’s lined up to increase investment in cryptocurrencies. Among the features that await for 2021 is to add-on new coins. Notably, Luno added two coins (XRP and LTC) this year.

The other feature is to add new digital asset features like the unique savings wallet. The Savings wallet basically allows users to allocate the Bitcoin in your Luno wallet to an interest-bearing account.

So, customers will be able to earn 3 to 4 percent per annum on the digital asset, on top of   storing their Bitcoins safely. Although the savings wallet is implemented worldwide on Luno, it is still in review by the regulators for Malaysia.

Luno also plans to add new deposit/withdrawal options, for example the addition of FPX this year, in line with their motive to make transactions easy and safe. Lastly, Luno assures that the public can expect more education & awareness programmes both online and offline.

He further affirms that Luno is a compliant company and everything done is subjected to regulations by the SC. Therefore, they need to wait for approval before introducing or adding a feature in their platform, unlike those DAX that are not approved.

“Many of these platforms are based overseas with no presence in Malaysia, meaning investors have no legal recourse in case anything goes wrong with the investments. As such, the SC has added several of these companies onto its Investor Alert List, warning Malaysian investors of the risks,” he shares.

He also addresses that cryptocurrencies are still new and volatile. While they may gain a lot, there is also the potential for investment losses. “As such, we advise beginners to start with a small amount, focus on learning, and never invest more than they are willing to lose”.

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