Digital assets regain lustre after turbulent year
Singapore’s central bank chief Ravi Menon raised eyebrows in late November when he told a panel discussion in Hong Kong that private cryptocurrencies were on their way out.
While Menon’s comments come off the back of a volatile year in crypto markets, sources who spoke with AsianInvestor assert that optimism about the industry's future is rising.
JRT Partners
Tuck Meng Yee of Singapore-headquartered single-family office JRT Partners said: “That’s like saying frequent flyer miles are on their way out.”
Joyce Woo, chief executive and head of Singapore at US-headquartered multi-family office Leo Wealth, put it simply, saying: “Cryptos are not going away.”
Recent events paint a complex picture of the sector. Crypto exchange Binance’s hefty $4.3 billion fine for money laundering casts a shadow, while the world’s third largest pension fund, South Korea’s National Pension Service, investing in competing exchange Coinbase signals continued confidence in the sector.
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Meanwhile, the prices of the world’s biggest cryptocurrencies by market capitalisation – Bitcoin and Ethereum- are buoyant, up more than 165% and over 80% year on year, respectively.
First Digital Trust
CRYPTO CLEANUP
Vincent Chok, chief executive of Hong Kong-headquartered digital asset financial services firm First Digital Trust, noted that the Binance settlement is actually good for the industry because "it shows a large player in the crypto space coming to an agreement, trying to clean up some of its past issues and move forward."
Binance’s troubles had not significantly impacted crypto prices, indicating a greater level of stability in the sector, he added.
State Street Digital
Irfan Ahmad, head of digital asset commercialisation for Asia-Pacific and the Middle East and North Africa at State Street Digital, told AsianInvestor that the “cleaning up of the ecosystem” that the Binance case had brought constituted a tailwind for crypto and had spurred increased bullishness among institutional investors.
ETF EXPECTATIONS
The expected approval of applications by Wall Street heavyweights BlackRock and Fidelity to open spot Bitcoin and Ethereum exchange-traded funds by the US securities regulator is likely to provide a further boost.
“The market appears to think a green light [for spot crypto ETFs] is imminent, and the rallying of [crypto] prices is an indicator,” Ahmad said. “There’s also an expectation that in Q1 2024 we’ll see interest rates falling, so that may – as we’ve seen historically – drive some of that cash into risk-on assets.
He said the next Bitcoin “halving” – an algorithmic process that reduces Bitcoin miners’ rewards by 50% every four years – would boost the value of the world’s oldest crypto and lift the broader market.
“There’s a lot of anticipation around the next Bitcoin halving cycle, which will increase scarcity, and so there’s a lot of movement ahead of that in order to allow for investors investing into crypto to position adequately for what is predicted to be a bull run,” he explained.
TARGETING TOKENISATION
Ahmad said that in addition to crypto, tokenisation was gaining increased interest among institutional investors in Asia.
“There's been a growing up of the industry to look at practical use cases in which tokenisation might be accretive, investigating the possibilities of creating a set of services related to tokenisation – whether it be tokenising cash, money or market infrastructure – and the industry is leaning into that.”
Leo Wealth
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Woo said tokenisation would create opportunities for investors when it came to new financial infrastructure.
“If you’re going to take tokens, you need exchanges,” she said.
Ahmad said investors were increasingly aware of the limitations of the existing financial architecture, creating further opportunities in the digital asset space.
“What's being realised among traditional firms is that the replatforming of financial services is an inevitability,” he said.
Leo Wealth
INFRASTRUCTURE INTEREST
Desmond Foo, investment director for Singapore at Leo Wealth, said that infrastructure represented a significant portion of the digital asset investment opportunity.
“As digital assets become more popular, there’ll be higher demand for things like cybersecurity, for example, so investing in such companies might be one way of gaining exposure without taking on the same level of risk as investing directly in digital assets.”
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Chok also noted that investors were increasingly likely to allocate capital to Web3 as it evolved into a holistic ecosystem.
“My belief is that they're going to look for companies that can really add and build Web3 as a reality,” he said.
“You cannot have Web3 without digital currency, without artificial intelligence, and without blockchain, so these three components are what investors will probably focus on.
“There’s an old saying that instead of digging for gold, sell the shovels and buckets, and you’ll make more money than actually trying to dig for the gold itself.”