Investments in cryptocurrencies increasing steadily in Malaysia

MALAYSIANS generally have an optimistic outlook on their investments in cryptocurrencies and are aware of risks when investing in cryptocurrencies, as many believe the asset class has several attractive features that make them an excellent alternative investment.

Luno Malaysia country manager Aaron Tang said he has seen days where thousands of locals signed up for accounts per day this year as many are very interested in this asset class.

According to our latest survey on understanding the financial management habits of Malaysians, 62% of current investors stated that they would consider investing in alternative assets like cryptocurrencies as a way to diversify their portfolios.

“Some 37% of respondents noted that utilising cryptocurrencies for long-term investment purposes was an exciting feature of the digital asset while 40% stated that using cryptocurrencies as an alternative store of value,” he told The Malaysian Reserve.

The Securities Commission stated that over 300,000 new accounts have been created in Malaysia this year to trade digital assets, with the value of these assets exceeding RM16 billion as at end September, despite market uncertainties and volatility in this asset class.

The number of new accounts created to trade digital assets has increased by nearly 35% since January this year, with nearly 60% of the new accounts being opened by investors under the age of 35, the regulator added.

Tang expects retail demand for cryptocurrencies to continue growing due to its rising popularity.

In Malaysia alone, we have more than 300,000 customers to date. We believe this number will grow as cryptocurrencies continue their rapid march into becoming an established asset class soon.

“We believe more institutional investors will take an interest in cryptocurrencies. Institutional investors such as MicroStrategy, Tesla and Square, have helped to widen acceptance of cryptocurrency,” he added.

According to a study by Fidelity Digital Assets conducted between December 2020 and April 2021, 71% of institutional investors expect to gain more cryptocurrency exposure in the future.

More than 90% of those interested in digital assets expect to have portfolio allocation within the next five years. In addition, 52% of institutions across Asia, Europe and the US invest in digital assets.

Tang said the influx of institutional investment is hugely positive for many reasons. The belief shown by these institutions suggests the crypto industry is maturing as a whole.

CEOs have concluded the regulatory framework they need is now strong enough to feel confident enough to get involved.

“Their work paves the way for other institutions and high-net-worth individuals to invest their liquid assets into cryptocurrency,” he said.

In a global economic environment of substantial monetary stimulus and low interest rates, digital assets like cryptocurrencies have seen tremendous interest from many investors worldwide.

For example, bitcoin has rallied from US$13,134 (RM54,375) a coin a year ago to US$61,429 (at the time of writing) as cryptocurrency has become an alternative investment asset to some investors.

According to Tang, bitcoin is considered an alternative store of value due to its similarity to gold. It has a limited supply of 21 million and it can be made into smaller units without losing unit value.

The technology that powers it, blockchain, makes it very stable and virtually impossible to counterfeit due to its decentralised nature or, in other words, its entirely free from traditional third-party financial institutions like banks.

Bitcoins role as digital gold has established itself as a hedge against inflation. Due to the Covid-19 pandemic, central banks worldwide have pumped more money into circulation as a response to recharge the economy.

“As a result, the value of money continues to drop, and more investors look at cryptocurrencies to soften the impact of inflation” he explained.

Tang stressed that diversification is another reason why investors are interested in bitcoin.

What makes bitcoin an exciting asset to diversify into is its general low correlation to the behaviour of other assets such as equities, bonds and gold, he added.

As a result, bitcoin could serve as a strategic allocation in well-diversified portfolios despite its volatility.

“Its low correlations to conventional asset classes should minimise peculiar risks and lower overall volatility, resulting in higher risk-adjusted returns. Bitcoin has also become the best performing asset class over the past decade, making it an attractive investment asset for many investors to consider including as part of their portfolio,” Tang said.

Luno provides a convenient platform for users to safely buy, store and sell cryptocurrencies in Malaysia.

In line with digital and financial inclusion principles, customers can get started to invest in the crypto market from as low as RM1. In addition, Luno has made the barrier to entry low to be as inclusive as possible.

Tang said to trade or invest in cryptocurrencies, account holders can safely deposit their money into a Luno wallet via an FPX transaction, similar to topping up an e-wallet.

“We want to remove all the difficulties and hassle, so our platform consists of instant deposits via FPX to improve user experience by providing instantaneous transactions. In addition, we have a ‘Repeat Buy’ feature, allowing users to schedule automatic cryptocurrency purchases conveniently,” Tang said.

The Luno wallet allows account holders or users to store their cryptocurrencies with ease of mind, making use of multi-signature wallets protected by multiple encryption layers.

With the best security features in mind, Luno provides customers with industry-leading tools to further strengthen their security, for example, two-factor-authentication and the ability to instantly lock their accounts when detecting any suspicious activity, Tang said.