Digital currencies gaining interest with Malaysian investors

Although the number of cryptocurrencies in the world is reaching 5,400 coins, only 2% of Malaysia’s 30m population has adequate knowledge about cryptocurrencies


INCREASED cryptocurrency activities in the digital asset exchanges (DAXs) indicate Malaysian investors are actively taking part in the global trend of diversifying money into digital currencies.

Luno, a DAX headquartered in London, UK, stated that data collected shows a 50% uptick in active users recorded over the last four weeks, while other exchanges globally report similar spikes in interest.

Luno (M) Sdn Bhd country manager Aaron Tang said the volume on the exchange here grew by 33% in the same period.

Luno, which was granted a full licence by the Securities Commission Malaysia (SC) last year, also reached the highest number of active users in the period since it’s relaunched in October 2019.

“We believe the surge is partly driven by the belief that cryptocurrencies (particularly bitcoin) are a good store of value in difficult economic times.

“Some investors are also concerned about huge monetary expansion — due to stimulus packages around the world — which might lead to inflation, hence they’re using bitcoin and other cryptocurrencies to diversify their assets,” Tang told The Malaysian Reserve (TMR) in an email reply.

Not disclosing Luno’s Malaysian market share, Tan said there are a plethora of digital coin investors in Malaysia.

Globally, Luno serves about 3.5 million accounts across 40 countries. The exchange trades bitcoin and ethereum and just made the third most valued coin, ripple, available on its platform in March this year upon SC’s approval.

The second approved DAX in Malaysia, Tokenize Exchange, has also seen an increase in clients sign-up on its platform since getting the green light to accept clients in early April.

Its CEO and CTO Hong Qi Yu told TMR the firm is looking at an average of 30% to 40% in daily increase in trading.

“We are quite fresh but see that Malaysians are quite eager to sign up,” Hong said, without disclosing its number of registered account holders.

Although clients have registered, Hong said most of the investors are still adopting a wait and see approach in putting in their money in digital coins.

With the number of cryptocurrencies in the world reaching 5,400 coins, Hong estimates only 2% of Malaysia’s 30 million population has adequate knowledge about cryptocurrencies.

The total value of digital assets on the global exchanges has slumped from US$304 billion (RM1.33 trillion) on Feb 15 to US$139 billion on March 16.

The value has since recovered to US$226 billion as of April 27, with bitcoin still accounting for about 64% of the total cryptocurrency market, followed by ethereum at about 9.8% of the market.

Tang said Luno is currently concluding a study to see the correlation between the Covid-19 pandemic and its impact towards the digital assets market.

Much like the sell-off experienced in the conventional asset markets since the pandemic hit, Tang said investors have also done the same with cryptocurrencies like bitcoin to which he believes this was broadly a move into cash by investors.

“People need cash in difficult times, so they’ll liquidate whatever they’re currently holding. If we look at that specific period, the correlation between cryptocurrencies and traditional asset classes will be high because everyone was selling,” Tang said.

In recent weeks, however, the market has started to see cryptocurrency prices and stock prices “decouple” a bit more. “Since the ‘bottom’ on March 12, bitcoin has climbed about 39%, meanwhile the S&P 500 has gained back about 26% since its recent low on March 23,” Tang said, adding that more time is needed to fully test this hypothesis.

“In four to six months, we should have a far clearer picture around how non-cor-related bitcoin and cryptocurrencies are (towards the crisis),” he added.

Analysts are of the view that cryptocurrencies could turn bullish this year influenced by the bitcoin halving protocol set to take off in mid-May, as investors stock up the asset in advance.

Bitcoin is now valued at US$7,717 with a US$141.6 billion market capitalisation, which is about 23.5% higher compared to what it’s registered at the end of February.

In March, the India Supreme Court struck down a ban imposed by the country’s central bank, Reserve Bank of India, on institutions from allowing their system to be used for cryptocurrency payments.

This move, digital asset industry analysts say, may pave the way for the revival of bitcoin and other coins as an asset class by reopening the formal financial system in Asia’s third-largest economy and home to 1.35 billion people.

“It’s an advantage in the current lockdown situation as people are sitting at home and have time to trade on their computers,” an expert said.