Luno considers current Bitcoin movement as bullish instead of merely a correction

by AFIQ AZIZ/ pic by BLOOMBERG

LOCAL Bitcoin investors and industry players are optimistic the cryptocurrency’s price could go beyond its current value as investors shift their assets from equities to safe-haven assets including gold and cryptocurrencies.

They, however, noted the shift may take some time and when it does, Bitcoin could retest its historic high of US$20,000 (RM83,540) recorded in December 2017.

Bitcoin price peaked at US$12,200 on Aug 18 after hovering around US$4,000 in March when the Covid-19 pandemic started to spread globally.

Other major cryptocurrencies have followed the price trend and the digital assets are expected to remain bullish, said Luno Malaysia Sdn Bhd.

“From June to August, Bitcoin, in ringgit term, has surged from RM41,358 per coin to RM49,920 as of Aug 20, indicating Malaysian investors’ sentiment towards cryptocurrencies is bullish even after the MCO (Movement Control Order) period,” Luno South-East Asia GM David Low told The Malaysian Reserve (TMR) in an email reply.

The price rise represents a return on investment of more than 20% in less than three months if the investment was made in June.

In April, Luno told TMR interest in cryptocurrencies has grown significantly in Malaysia with trading volumes on its platform locally growing 33% over the past four weeks. The strong growth comes on the back of the extended lockdown restricting travel and non-essential businesses implemented starting March 18.

At present, Malaysians are only allowed to trade Bitcoin, Ethereum, Ripple and Litecoin at Luno and two other platforms approved by the Malaysian Securities Commission — Sinegy Technologies (M) Sdn Bhd and Tokenize Technology (M) Sdn Bhd.

Bitcoin, which dominates 60% of the crypto market now, also went into the halving process in May.

Halving is a process that takes place every four years that seeks to reward coin “miners”. Halving refers to the number of coins that miners receive for adding new transactions to the blockchain being cut in half, and the last halving of Bitcoin occurred in 2016.

Market forecast suggests the latest halving will push Bitcoin price to its December 2017 level. According to Low, Luno considers the current Bitcoin movement as bullish instead of merely a correction.

“Rather, we think Bitcoin is entering into a bullish phase and is finally making its long awaited gains for the year, evidenced by its price surge to US$12,000, which is a year-high record. We remain bullish about cryptocurrencies for the rest of the year,” he said, adding that Malaysian investors continue to invest and trade cryptocurrencies since the MCO recovery period.

“We continue to see strong demand from new investors and this is evident with a higher download of the Luno app and website traffic too.”

Tokenize Technology CEO and CTO Hong Qi Yu believes the positive price trajectory of Bitcoin and other digital assets will attract investor attention.

“It is always important for investors to apply risk management and only invest their money that they can afford to lose,” he warned.

Hong said the boost in digital assets prices was due to three key factors, the surge of involvement from institution players, the weakening of the US dollar and more investors diversifying their portfolios to include cryptocurrencies.

Bitcoin price has also tracked gold price movement in the past few months, leading Hong to say the price action in gold can serve as a good reference and give investors an idea on the price direction of cryptocurrencies.

“We can see previously digital assets like Bitcoin following equities market price direction quite closely as a ‘risk-on’ asset and now it switches gear to ‘risk-off’ asset with it tracking safe-haven asset price movement much closer,” Hong added.

A recent study by Luno, however, revealed the correlation between gold and Bitcoin is still relatively low.