Crypto-currency traders are moving to online forex trading as digital currencies continue to be volatile.
This is according to online crypto-currency trading platform Infinox, which notes the world continues to look for ways to negotiate the disruptions caused by the COVID-19 pandemic.
Millions have lost their livelihoods, and individuals and companies still face uncertainty, says the firm, adding that the world’s largest market, the forex market, has also been affected by the pandemic.
UK-based online trading firm Infinox in May expanded into SA, after recording a 925% surge in trading volumes across Africa in 2020.
Founded in 2009, Infinox offers customers and businesses trading services in a range of asset classes. The contract-for-difference and forex broker helps investors gain access to markets so they can trade forex, stocks, indices, commodities and futures, using its Web or app-based trading technology.
It has set up two local offices – in Cape Town and Johannesburg – and currently employs more than 40 people. Infinox says it is looking to expand further, with a recruitment drive in several areas of the business.
“Many traders dealing in crypto-currencies moved to forex, because of its greater stability. While crypto-currencies provided the volatility and excitement craved by traders before the pandemic, they appeared far too risky during current uncertainty,” says Dany Mawas, regional director at Infinox.
Tanking prices
Bitcoin, the world’s most popular digital currency, and other crypto-currency prices have fallen sharply over the last month, with the combined crypto-currency market losing around $1 trillion in value.
The Bitcoin price dropped from over $60 000 per Bitcoin to under $35 000 from mid-April through to mid-May.
At the time of writing, Bitcoin was trading at $34 600 (R492 000).
Ethereum, the second-largest crypto-currency by value after Bitcoin, lost half its value in just two weeks as its price tanked in the aftermath of the Bitcoin sell-off, while Cardano and Binance's BNB also crashed.
As the prices of these crypto-currencies continue to be volatile, with investors also losing out in crypto scams, the South African government recently made some bold moves to regulate the industry.
Last month, the Intergovernmental Fintech Working Group (IFWG) – made up of members of various key players from the South African government, including the South African Revenue Service, South African Reserve Bank and the Competition Commission – released a paper which takes the position that the country should begin to regulate the crypto-currency markets.
While the crypto-currency market experienced a major sell-off last month following China’s crackdown on the sector, Nigel Green, chief executive and founder of deVere Group, is bullish, saying the “crypto haters” are wrong to dismiss the digital assets.
“For many investors, experienced and less experienced, the new lower prices triggered by the panic selling will be used as a key buying opportunity.
“Even those in China – which is a major market for Bitcoin and the wider crypto sector – will find ways to navigate their way around the system and top-up their portfolios at the lower entry points. We can expect further pull-back in the price of Bitcoin in the near-term, which too will be used proactively by investors.”
Green continues: “It’s our experience that investors are not in crypto to make a quick buck. They’re in it as a longer-term, future-first investment to create and build wealth.”
Uptick ahead
Sean Sanders, founder and CEO of crypto trading platform Revix, says digital currencies have been victim of the fluctuating tides of market speculation and regulatory revisions in certain regions, and with pandemic-fuelled inflation fears looming, the market has felt the pinch.
But if history is anything to go by, an uptick in the market is on the cards, Sanders says.
“Since 2017-2018, the crypto space has generally seen bull cycles (an upward trend) which has pulled back by around 30%, up to five times. This isn’t out of the norm and has happened many times before. And it will not be the last.”
He notes that investing – no matter the asset class or investment portfolio – is as much an emotional game, as it is a thought-out rational game.
“Some people get a thrill out of those ups and downs. These people were ecstatic when they saw their investments in crypto-currencies double, triple and, in some cases, increase 10-fold. Now that the market has pulled back, they are very quick to divest.
“You have got to be in it for the long haul. Hold on, or hodl – as the crypto-currency lingo goes − as the market is certain to rebound, as it has many times in the past. This slump in market value is a great buying opportunity – buy low, so that if you don’t want to hodl, you can sell at a higher price,” Sanders says.
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