Aaron Tang, Luno Malaysia Country Manager_photo

Is it Too Late to Start Investing in Bitcoin?

By Aaron Tang — Luno Malaysia Country Manager

The noise around Bitcoin has risen sharply in the last month after the world’s most popular cryptocurrency reached its all-time high on 9 November 2021. With all the talk of its price continuing to grow, it is easy to think that it might be too late to start investing in Bitcoin. However, it is not too late and, in fact, Bitcoin adopters are actually early. Bitcoin, and cryptocurrency in general, has received mainstream adoption and looks to be around for years to come.

Cryptocurrency is a technology that inspires people to change their way of using money. In Bitcoin’s case, its technology is open and transparent and has the potential to improve the global financial system. Bitcoin’s real value can be seen in global adoption over time and in emerging use cases whether as a payment method, a store of value, or a hedge against inflation. Not forgetting the fact that Bitcoin is still a young technology having been around for just over 12 years with much potential for the future.

It is still early days

Bitcoin is considered to be 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. Much like a ringgit can be broken up into cents, Bitcoin is made up of satoshis. Each Bitcoin is made up of 100 million satoshis. This means there are two quadrillion one hundred trillion satoshis. This converts to nearly 275,000 satoshis for every person in the world. 

The value of these satoshis will vary in line with the Bitcoin price. So if Bitcoin is worth USD50,000 (RM208,000), that means investors can buy one satoshi for just USD0.0005 (RM0.0021). People will probably not limit themselves to 275,000 satoshis, it is recommended to buy while Bitcoin’s price is low, as it has the potential to rise much higher in the future.

Just how early is it?

From a technological standpoint, Bitcoin has yet to reach anything like mass adoption — though it is certainly getting there. Bitcoin has been around for just over 12 years now and other cryptocurrencies for far less time. Most new technology goes through a hype cycle before getting a mainstream stamp of approval. In the 1990s, the internet underwent this phase before getting accepted by the general public.

The hype cycle dictates that a technology will first develop and attract attention, resulting in many people having conversations about it. But the hype becomes unsustainable, and after a while, the public loses interest and becomes disillusioned. With time though, the technology inches its way out of the trough of disappointment and hits the plateau of productivity. Eventually, it fades into the background and becomes the new normal, thus, becoming an essential part of our lives.

What stage of the hype cycle is Bitcoin currently?

It is difficult to say with any certainty at the moment, but Bitcoin arguably hit the peak of inflated expectations around 2017 when its price exploded. Over the past year, there was increased demand for cryptocurrency among Malaysian retail investors looking to diversify their portfolios. The Securities Commission Malaysia recently reported that over RM16 billion worth of digital assets were traded in Malaysia between August 2020 and September 2021, highlighting the growing popularity of cryptocurrencies among Malaysians. That would mean we are now on the slope of enlightenment, with Bitcoin on its way to becoming widely used but not quite there just yet. This can be seen not just in Malaysia but globally as well.

Countries including El Salvador are making Bitcoin legal tender, major payment providers like PayPal are helping millions of retailers accept cryptocurrency, and more institutional investors are joining the space. The influx of institutional investment is hugely positive for many reasons. High among these is the stature of those involved as it is a show of confidence in its potential and its status as a store of value. In addition, the belief shown by these institutions suggests that the industry as a whole is maturing.

What Bitcoin brings to the financial system

At the end of the day, it is not about being too early or too late. What is important is the problem Bitcoin is solving. Bitcoin is a new way of looking at our financial system; one that is more open and transparent. It makes money more useful and helps it keep its value, providing a hedge against rising inflation and currency devaluation. It is also considered by many to be the payment system of the future. Such factors have helped support Bitcoin as a viable alternative investment vehicle that the everyday retail investors can easily gain access to.

This is evidenced from our latest consumer survey on understanding the financial management habits of Malaysians[1], where we surveyed more than 1,000 adults in Malaysia — a statistically accurate representation of Malaysians, covering multiple age groups, genders and demographics.

In the survey, Malaysian investors are more confident in the idea of using cryptocurrencies as a viable method in attaining long-term wealth creation and preservation. A total of 62% of current investors stated that they would consider investing in alternative assets like cryptocurrencies as a way to diversify their portfolios. Furthermore, 37% of respondents stated that the ability to utilize cryptocurrencies for long term investment purposes was an interesting feature worth considering. On a similar note, 40% of respondents stated that using cryptocurrencies as an alternative store of value was an attractive feature as well.

It is hard to predict the future, but in the past year, we have seen cryptocurrency adoption mature, and people’s desire to understand and get involved in it keeps growing.  Ultimately, cryptocurrency is just getting started and we look forward to the benefits it could potentially bring to the modern financial system.