Cryptocurrencies – with volatility comes opportunity

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PETALING JAYA: Cryptocurrencies’ volatility is not without opportunity, stressed Sinegy’s co-founder and managing director, Kelvyn Chuah (pix).

In November, bitcoin – the flagship cryptocurrency – reached an all time high of US$68,521 (RM289,878) on Nov 5, 2021 before plunging roughly 20% to US$54,321 on Nov 26.

Volatility notwithstanding, Chuah pointed out that local digital asset exchanges (DAX) have engaged in educational outreach programmes to expose this asset class to the average consumer.

“As the public become savvier, they will ultimately know what a good percentage of their net worth is to put into this asset class,” he told SunBiz.

“We normally recommend between 1% and 3% but I have come across active traders who will put in more depending on their trading strategy.”

Chuah gave the example of arbitrage trading employed by some crypto trades, which simply involves taking advantage of the price differences between local DAX. He explained that due to the mechanism of supply and demand, every platform has its own price.

As for criticism over cryptocurrency’s carbon emission, the Sinegy co-founder gave his take on the matter, noting that the first question in this equation is whether the source of energy can be green. Towards this endeavour, he pointed out a local company, Bitfarm-Asia, is collaborating with Sarawak Energy to pursue green energy mining of cryptocurrencies.

“Despite the criticism, the demand for crypto isn’t affected. In fact, we have seen a lot of interest in the mining space this year from locally established companies, especially since China banned crypto mining.”

Chuah disclosed that he recently found out Malaysia is one of the top 10 countries for crypto mining. While there have been cases of electricity theft for such purposes, there are others that have planned to establish proper mining operations. Eventually, as society embraces greener and more environmentally friendly sources of energy, he believes crypto mining will become a more mainstream activity.

From its initial objective as a secure, instantaneous and anonymous means to electronically transfer money across the globe, the asset class has found its stride in non-fungible tokens (NFT), an application of crypto which entails the minting and trading of art utilising blockchain technology.

With the advent of NFT, Chuah said, Sinegy recently onboarded a corporate account for a local NFT marketplace, Pentas.io.

He also said he believes that savvier local traders are using regulated local DAX as a first fiat on-ramp to overcome restrictions relating to access to NFT marketplaces. “This is also true when they are exiting or withdrawing their assets back to the local currency, the ringgit.”

“On-ramp” is a process or service that allows for the exchange of fiat currencies (example, US dollar, ringgit) for cryptocurrencies (example, bitcoin, ethereum). On the other side of the coin, “off-ramp” allows for the exchange of cryptocurrencies for fiat.

Asked for his insight into the latest developments on crypto, Chuah revealed that there are more companies locally setting up corporate accounts to hold digital assets on their balance sheets, similar to what is happening in the West.

Chuah said there has been growing interest leading to more signups.

“There are clear benefits to trading with an entity and, slowly but surely, people are starting to realise that. One can have a corporate account even when owning a sole proprietorship business.”

For the convenience of its clients, Sinegy has introduced a feature called Quick Trade which allows clients to convert their ringgit quickly into digital assets without having to interact with the order book of the exchange.

Chuah said while the feature for this order type is generally higher in trading fees, there will be no additional charges levied on the clients. The same low fee is like performing a taker trade on the exchange.

“Moreover, we should be seeing more coins being permitted for trading in 2022. I personally will be looking forward to that as well,” he added.

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