Millions of Aussies are looking to make cash from cryptocurrency as some digital coins have surged in value, sometimes in the space of a week.
During the past year, cryptocurrencies have soared, with some multiplying in value by 186 times, compared to the share market climbing by 47 per cent and Sydney house prices growing by 10.4 per cent.
One in four Aussies have already made investments or are planning to trade in cryptocurrency this year, according to research from Finder, which amounts to around five million people.
More Australians now invest in cryptocurrencies like Bitcoin than precious metals like gold and silver, added cryptocurrency and digital assets exchange BTC Markets.
The largest cohort of crypto investors fall within the age group of 25 to 34 years with over a third making a play for the digital cash, followed by 35 to 44 years, BTC Markets’ research found.
It also uncovered that one in three crypto investors made their first investment in Bitcoin or other cryptocurrencies after the stock market crash led by the COVID-19 pandemic in March 2020.
Australia’s cryptocurrency investors overwhelmingly hold Bitcoin, followed by Ethereum, Ripple, Litecoin and Bitcoin cash.
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BTC Markets CEO Caroline Bowler said she is not surprised that more Australians now invest in cryptocurrency than fixed income, annuities or commodities.
“Digital assets and cryptocurrencies are becoming increasingly popular among Australian investors of all ages,” she said.
“In the last 12 months we have seen a shift from 25 to 45-year-old males to a much broader age group, particularly early retirees who are interested in diversifying their investment portfolio and are catching up with this fastest growing asset class.”
Most Aussies are looking to hold onto their crypto for the longer term rather than using the digital coins as a get rich quick scheme, she added.
Its research found a quarter of Bitcoin investors usually hold their investment for one to three years.
Just under a quarter hold Bitcoin for more than three years and 17.6 per cent hold it for six to 12 months.
Only 8.6 per cent of investors confirmed holding Bitcoin for less than a week.
So what are the top cryptocurrencies?
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It’s the most popular alternative digital currency with a number of companies now accepting it as payment including electric car company Tesla, PayPal and Mastercard. Even auction house Sotheby’s is jumping on the trend, with a Banksy art work going under the hammer with crypto a payment option.
In April, Bitcoin plunged by a dramatic 15 per cent in 24 hours – its sharpest slide in months.
The tumble happened just days after the world’s top digital coin hit a record high of more than $US64,000 ($A82,755).
Between April 25 and May 5, it hovered at a worth of around $70,088 and rose by 10.7 per cent in one week. Overall, it has grown by 423 per cent in a year and it has a market valuation of more than $1 trillion, although supply of the coin is restricted to 21 million units.
Bitcoin has a share of 46 per cent of the global cryptocurrency market, according to CoinGecko date, but is an expensive buy meaning many investors are forced to buy just a fraction of a coin.
Ethereum, often seen as the “little brother” of the more famous Bitcoin, is catching up too.
Tony Sycamore, APAC market analyst at City Index, said after more than a 200 per cent gain between mid December and mid April, Bitcoin has spent the past month consolidating those gains.
“Consolidation in markets is common after big moves and digital assets are no different in this respect,” he said. “As part of the consolidation, Bitcoin fell from near $65,000 to below $50,000 in late April and has remained in a holding pattern since. This has prompted investors to look for new opportunities in other areas of the crypto market including Ethereum.”
But while it’s possible that other coins could overtake Bitcoin, it’s unlikely, according to crypto expert Adam Morris, co-founder of Crypto Head.
“Bitcoin has solidified itself as the gold equivalent in this market and most institutional investors are predominantly investing in it as a store of wealth,” he said.
Just last week the price of Ethereum rocketed past $4206 for the first time as the cryptocurrency’s momentum grows. It is now worth more than Disney, PayPal and Nestle.
In April, the growth of Ethereum fast outpaced that of Bitcoin. In one week it shot up by 49.7 per cent up from a value of $2862. Compare this to the Australian share market, which took a year to grow by 49 per cent.
Over a year, Ethereum has grown by a whopping 1385 per cent. Unlike Bitcoin, it also has an unlimited supply, which could also boost its popularity.
The surge in value has made Ethereum’s creator, 27-year-old Russian-Canadian programmer Vitalik Buterin, a billionaire.
Part of its newfound popularity is being attributed to the NFT craze putting it back on the map. NFT is a unit of data stored on a digital ledger, called a blockchain, and Ethereum is the cryptocurrency of choice for the purchases of many NFTs.
An NFT of the photo which sparked the iconic “Disaster Girl” meme sold for a mind-boggling $650,000 in April.
The price rise of Ethereum has been astronomical. At the start of 2017 it was selling for $13 and in 2020 just $193. Overall, its now got a market valuation worth more than $US212 billion.
Long-term, Ethereum is set to be a powerhouse in the crypto industry, said Mr Morris.
“It’s likely that Ethereum will keep rising and if history repeats itself we’ll probably see it all-time-high towards the end of the year,” he said. “But it’s important to realise that we are in a market cycle and it will have major corrections.”
Started as a joke cryptocurrency, the backing of a billionaire has seen this digital coin surge in value.
It saw dramatic increases before the appearance of Tesla CEO Elon Musk on popular American show Saturday Night Live, before dipping during the show.
But before that it soared by 137 per cent in one week between April 25 and May 5 increasing from 29.85 cents to 70.78 cents. It’s price has surged by 186 times or 18,526 per cent in the past year.
Mr Musk also influenced the price hike to $US1 at one stage, which was followed by other celebrities on Twitter and other platforms spruiking the parody crypto.
Mr Morris said the reason people like investing in cryptocurrencies like Dogecoin is because they feel they can turn their investment into a much larger amount in a short period of time. “While it’s one of those investments that could go well short-term, this gambling mentality makes for poor long-term investment decisions. But, when it’s risen by 1260 per cent in the last month you can see why retail investors would be attracted to invest,” he said.
“It’s coins like this that are first to drop 95 per cent in a market crash, which has already happened in the 2018 crash. It’s incredibly high risk because it has no real utility and has seen huge price increases off the back of celebrities and the gambling mentality of newer investors.
“If you’re investing in coins like this you need to be on the pulse and understand the level of risk you are taking on.”
Created by an ex-Google engineer in 2011, it has attracted a lot of attention as one of the world’s best performing cryptocurrencies in terms of price.
It surged by 49 per cent in one week topping a value of $421.50. Over a year it has grown by 550 per cent, but its supply is limited to 84 million.
It was designed to be used for cheaper transactions and to be more efficient for everyday use, compared to Bitcoin, which is set up to store value for long-term purposes.
Litecoin’s overall value is currently around $US13.7 billion, with Bitcoin’s market cap 70 times larger.
Similar to Ethereum, coinciding with the lull in trading in Bitcoin the price of Litecoin has surged over 80 per cent since late April, added Mr Sycamore.
However, Bank of England governor Andrew Bailey has taken an almighty swipe at cryptocurrency investors, warning punters to be prepared to lose all their money to the online phenomenon.
He said the volatility is cause for serious concern for anybody with real money invested in cryptocurrency.
“They have no intrinsic value. That doesn’t mean to say people don’t put value on them, because they can have extrinsic value. But they have no intrinsic value,” he said, according to a report from CNBC.
“I’m going to say this very bluntly again … buy them only if you’re prepared to lose all your money.”
There is also speculation that President Joe Biden’s administration could crack down on cryptocurrency amid fears its being used by criminals.
In Australia, Liberal senator Andrew Bragg, chairman of a parliamentary committee on regulating financial technology, had warned more regulation is needed particularly for blockchain technology, which underpins cryptocurrency Bitcoin.
He also admitted that banks and law enforcement agencies are “flying blind” in distinguishing legitimate and illegitimate uses of cryptocurrency.
Laws are expected to be introduced within the year that will make cryptocurrency investors pay tax on their capital gains too.