The crypto-currency sector continues to show strong growth despite a weak global economy.
According to crypto-currency exchange Luno, over the past month, Bitcoin is up 28% and is now trading at R169 000.
It notes that despite severe economic contraction since the global COVID-19 pandemic, this sector is acquiring new entrants, reporting higher trading volumes and presenting a more compelling use case.
It believes transmission of COVID-19 via surfaces is incentivising society to move towards a cashless environment, which augurs well for digital money.
As South Africa imposed necessary restrictions on social distancing in March, three-quarters of South African consumers (75%) say they are now using contactless payments, citing safety and cleanliness as key drivers, a recent study by Mastercard shows.
“According to the new Mastercard study, this shift in behaviour is particularly clear at checkout as people express a desire for contactless, and voice concerns over cleanliness and safety at the point of sale,” says Mark Elliott, division president for Mastercard, Southern Africa.
According to Luno, record trading volumes were achieved in March and there was a 50% rise in its number of active users month-on-month. Luno has over three million users across 40 countries worldwide, the company says.
Marius Reitz, GM for Africa at Luno, says: “This indicates continued crypto-currency investment by existing holders and entirely new investors entering crypto-currencies for the first time.”
Reitz adds that a recent client survey, undertaken during the pandemic, highlighted 42% of Luno wallet-holders plan to buy more and 41% plan to trade in the next six months.
“Over 4 000 customers responded to our survey. They indicated they are planning to increase their crypto holdings or trade in the next six months, while less than 6% plan to sell. Interestingly, 70% of inactive customers want to automatically invest a fixed amount in crypto-currencies, indicating they are moving closer to traditional investment models,” he says.
Nigel Green, founder of deVere Group, comments: “This new world needs new ways of doing things to fit the new normal.
“Clearly, one of those things which is needed now more than ever, as the world becomes ever-more digitalised and globalised, is digital and global currency, such as Bitcoin. This will not have gone unnoticed by investors who are increasingly piling into crypto-currencies.
“Also, these unusual times have forced central banks to increase monetary supply. By printing never-seen-before amounts of money, traditional currencies are devalued and inflation fears rise. This will also drive investors towards decentralised, non-sovereign digital currencies.”
The crypto-currency industry’s growth and maturity becomes more evident as countries around the world investigate their own central bank digital currencies, Luno notes. In addition, regulators continue progressing regulations for the industry, it points out.
South Africa’s draft regulation framework is currently open for public comment until 15 May.
“Luno welcomes regulation as it will provide comfort to consumers and professional service providers such as banks and auditing firms that the company they are dealing with is held to defined regulatory standards,” says Reitz.
“Regulation in the industry can have a very positive impact. Imposing regulations in South Africa and across the world will enhance general trust in and stability of this market. It will likely result in even more talent and investment capital flowing into the industry, unlocking more business models and bringing more advanced products to market.
He adds that the sector continues to attract and retain top talent worldwide, with high-calibre candidates with scarce skills joining crypto-currency companies, ranging from software developers and security specialists, to financial, legal and compliance experts.
“In many cases, crypto companies are building their teams with candidates from legacy companies,” says Reitz.
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