Bitcoin’s rebound to $US50,000 ($69,185) this week will spell relief for rich Australian investors who made big bets on the cryptocurrency during its most recent sell-off.
Moreover, the sight of the leading digital currency again showing its ability to recover from sell-offs — it had sunk below $US30,000 in July — is expected to lure more wealthy investors into fresh speculation.
At Swyftx, one of the largest of the Australian digital exchanges, Tommy Honan, the head of strategic partnerships, says: “What we saw in the last sell-off was a lot of wealthy investors coming into the market and scooping up positions.”
Wealth advisers report that rich investors are keen not to miss out on what might turn out to be a lucrative new asset class, despite a torrent of scepticism from market influencers such as economist Nassim Taleb, who has described bitcoin as worthless.
Worthless or not, funds from wealthy investors continue to flow into cryptocurrencies. “We see our High Net Worth investors moving first into bitcoin, ethereum and more recently cardano — later they will often get into the smaller cryptocurrencies just to trade them,’ says Honan.
Sue Dahn, a financial adviser at Pitcher Partners, says that FOMO (Fear of Missing out) is a key factor in any money flows towards crypto. “We find older clients are not willing to enter the space, but when you deal with intergenerational issues then you have a wider age group involved and the discussion will come up.”
No surprise to find the bulk of the highrolling clients at the nation’s crypto exchanges are younger or have a background in technology. Operators such as Swyftx define their HNW (High Net Worth) customers as anyone who makes a trade valued at $500,000 or more.
For most wealth advisers, crypto — if considered at all — is categorised among alternative assets where clients are seeking to diversify their investment portfolios.
“We have looked at it — and we believe cryptocurrency is riding a wave of greed, while holding something like gold is based on fear. In that context gold can be a rational choice for some investors,” says Doug Turek of Professional Wealth.
Market leader bitcoin fell below $US8000 after the sharemarket crash of March last year. It then soared to break the $US60,000 mark in April before dropping to $US28,000, and then rebounding again to reach $US50,000 this week.
One thing is clear: whatever the outlook, crypto is attracting more mainstream players in recent times. The benchmark is being set by investment bank Goldman Sachs, which has opened a crypto trading desk with Wall Street rival Citi expected to follow with something similar in the near future.
Jeff Yew runs the Monochrome Asset Management, which offers the Monochrome Bitcoin Fund. Aimed squarely at rich investors the minimum investment in the fund is $50,000. According to Monochrome, clients to date are (46 per cent) wholesale qualified Self Managed Super Funds, (37 per cent) HNW investors, (11 per cent) family offices and (6 per cent) corporates.
According to Yew, inquiries from local Australian wealth advisers have doubled over the last month. “We’re here to let them know it is no longer a career risk to talk about bitcoin with their high-net-wealth clients,” he suggests.
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