Sunday, May 26th, 2019


Bitcoin price on ascent again – is it a fluke?

PETALING JAYA: Bitcoin, the most heatedly debated subject in the financial market a year ago, has seen some renewed interest recently when its price topped the US$8,000 (RM33,360) mark on May 15.

This marks a year-to-date increase of over 100%, but how would bitcoin perform this time around and what is driving its rally?

As at 6pm today, bitcoin price was trading at around US$7,975 (RM33,261), compared with US$8,099 (RM33,779) on May 15, according to blockchain and cryptocurrency online portal Coindesk.

Recall that bitcoin hit its peak of over US$20,000 (RM83,820) in late 2017, but it was followed by a sharp plunge in early 2018 with its price reaching a low of US$3,339 (RM13,993).

According to Yusho Liu, CEO of Coinhako, a crypto exchange platform based in Singapore, the spike in demand for cryptocurrencies recently was not an overnight surge as people have been monitoring the price movement all along for the past six to 12 months and the volume on its platform has doubled over the weeks.

“With demand picking up and an overall better understanding of blockchain technology, greater adoption is likely to come for both the retail and institutional sectors.”

He pointed out that on the retail side, it looks like cryptocurrencies are becoming the alternative asset for millennials.

“Definitely there is upside potential for prices, everything else is probably just speculation at the moment.”

Meanwhile, Ipoh-based digital asset exchange Pinkexc founder and CEO Fakhrul-Razi Abu Bakar attributed the surge in cryptocurrency to a trio of factors.

“What we are seeing is a trend associated with bitcoin halving, which is due in May next year. From the previous halving, normally a rally would start a year prior.”

Bitcoin halving refers to the rate of creation for new bitcoin issued for adding transaction records to its public ledger of past transaction or blockchain. Currently, 12.5 bitcoins are issued per blockchain. With the halving, 6.25 bitcoins will be issued for every blockchain.

Besides that, Fakhrul noticed an influx of institutional players, including venture capitalists and private equity firms, investing in cryptocurrency startups as well as a big pool of miners.

“Part of the bull run in cryptocurrencies is fuelled by these institutional investor, motivated by the FOMO (fear of missing out) seen in the last bull run of 2017,” he said, adding that bitcoin might replicate its previous peak in 2017 considering the prolonged bull run in the past two months.

Luno general manager for Malaysia and Southeast Asia David Low concurred, saying that institutional interest in bitcoin has been growing as companies and people continue to get comfortable with the idea that cryptocurrencies are here to stay.

“Perhaps they are looking to diversify their portfolios by making the first investments into bitcoin.”

For Fakrul, the other reason behind the bitcoin rally could be due to less interference from the government of China, home to three-thirds of global cryptocurrency miners.

The Chinese government has been at odds with cryptocurrencies. In 2017, it banned all initial coin offerings and domestic cryptocurrency exchanges in the country. It is also mulling a ban on cryptocurrency mining, but with the ongoing trade dispute with the US, China has been relatively quiet on the cryptocurrency front.

“Inadvertently, this has encouraged investors and miners of bitcoin in China,” said Fakrul.

Automotive sector hit by weak ringgit and consumer sentiment

PETALING JAYA: The Malaysian automotive sector is encumbered by a weakened ringgit and moderating consumer sentiment in 2019, said analysts.

“We expect total industry volume (TIV) to remain relatively flat year-on-year (y-o-y) in 2019 amid moderating consumer sentiment and high base effect from 2018, as well as a weakened ringgit against US dollar outlook,” said Hong Leong Investment Bank (HLIB) Research.

According to the latest data released by the Malaysian Automotive Association, the TIV for April stood at 50,000 units, reflecting a y-o-y growth of 6.1% and a month-on-month decline of 8.8%. Year-to-date, the TIV rose 5.9% to 193,000.

HLIB Research expects slower growth by the middle of the year due to the high base effect in 2018 attributed to the tax holiday period and has maintained its forecast of 596,600 units for the year, which is a 0.35% drop from the previous year. It also maintained its “neutral” rating on the sector.

AmInvestment Bank said that the sector will be challenged by external and domestic economic uncertainties, noting the drop in consumer sentiment index and the slightly higher unemployment rate in March 2019 compared with the first two months of the year.

Despite, the Overnight Policy Rate cut in May resulting in a slightly more attractive hire purchase financing rate, the challenge remains for the sector to entice consumers into a big ticket item spend.

“We believe that a stronger growth in vehicle sales will ultimately depend on higher wage growth and improvement in economic conditions to lift households’ confidence levels,” it said in a report last Friday.

The research house said that it is looking forward to the revised National Automotive Policy 2019 (NAP 2019), which is likely to be announced in the second quarter of this year.

AmInvestment Bank said that the new policy will set the long-term direction of the automotive ecosystem and provide more clarity on the development of the third national car project.

Meanwhile, TA Research opined that the lower TIV recorded in April might be attributed to high base effect in March and consumers holding off for the festive season promotions.

It maintained its “overweight” stance on the sector with a TIV forecast of 607,000 units for the year, reflecting a 2.1% improvement from 2018.

“We believe the growth will be driven by improving consumer sentiment and uplift in demand for those new sport-utility vehicle models in the market,” it said.

Current market volatility a chance for cryptocurrencies to showcase benefits

PETALING JAYA: Luno general manager for Malaysia and Southeast Asia David Low sees the current volatile market conditions as an opportunity for alternative investment systems such as cryptocurrencies to showcase their benefits that offer a secure, easy and efficient payment and investment option.

“Many liken bitcoin to ‘digital gold’, a hedge in times of uncertainty, but without the drawbacks that come with managing, transporting and storing physical gold. In fact, we believe bitcoin is a far superior store of value compared to gold.”

While 2018 was a comparatively quiet year, Luno Malaysia’s marketing and community manager Aaron Tang said, interest in and demand for cryptocurrencies have been picking up again over the past few weeks.

He added that the regulations implemented by the Malaysian government through the Securities Commission (SC) and Bank Negara Malaysia are an integral part for the evolvement of cryptocurrencies into a mainstream asset class.

Last month, the central bank and the SC announced that they had entered into digital asset regulation coordinating arrangements that will support the oversight of digital asset activities which will facilitate industry innovation, fundraising activities for early-stage companies and trading of digital assets as well as ensuring that systemic risk and financial integrity measures remain effective.

Previously, the SC amended its guideline on recognised market in January this year to include digital asset exchanges. The regulator greenlighted 22 out of 43 digital asset exchanges to continue operations past March 1, 2019 until such period as may be notified by the SC.

Tang welcomed the input of the regulators as it brings clarity and protection to businesses and consumers.

“We eagerly await the announcement of approved Digital Asset Exchanges by the SC which will allow customers to easily and safely access cryptocurrencies like bitcoin again.”

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