Insights for advisers, by advisers

Cointree approaches 100 thousand members as demand for crypto currency expands

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The Melbourne-based cryptocurrency exchange Cointree is one of Australia’s first and longest running crypto exchanges having launched in 2013. We were recently able to spend some time with the CEO of Cointree, Shane Stevenson to discuss recent events in the cryptocurrency and digital asset markets along with understanding where Cointree sees the future of the sector.

Q: Shane, thank you for taking time out of your busy schedule to speak with me. Firstly, congratulations on approaching 100k registered users, that’s no easy feat. Do you see those numbers continuing to rise and are millennials still a key part of this trend?

A: We’ve been seeing the cryptocurrency landscape take off this year, with thousands of new investors entering the market looking to access this emerging asset class. But while it’s certainly true millennials are taking up crypto in droves, we’re also seeing older generations starting to invest.

Q: Bitcoin (BTC) has suffered a significant drop in 2021, with both regulatory and sentiment issues seemingly behind it, can you shed any light on the recent volatility?

A: As it happens in many markets, there comes a point when upward trends taper off and the market moves into consolidation for a period. Add to this the topical nature of cryptocurrency investment, government interest across the globe, and influential commentary. It becomes hard to determine whether it’s simply market consolidation, investor response to an evolving landscape, or a combination of both. Continued institutional investment in bitcoin, along with government acceptance, such as El Salvador passing a bill to make it legal tender this week, are signs that the cryptocurrency has come a long way from its beginnings and the future is open for many more possibilities.

Q: We noticed a unique feature on Cointree, and that’s the ‘portfolios’ function. At a glance it would seem you have packaged portfolios with various cryptocurrencies inside, thereby helping reduce risk and volatility. Can you explain how they work?

A: Our portfolio feature is a sneak peek into the portfolios of our best customers. It shows you just how they’re balancing their portfolio to see significant growth. It’s a good tool for people new to crypto to see how they can diversify their crypto trading.

Q: The hype all over the media is NFT’s and I’m still to get my head around the Non Fungible Tokens. Are you able to explain in simple terms what they are and how they work?

A: Non-fungible tokens (NFTs) are digital assets that represent unique tangible or intangible objects like an art piece, video, or even a GIF and can’t be replaced with something else. For example, a one-of-a-kind AFL jersey signed by one of the greats is a non-fungible item – it simply could not be replaced. Bitcoin however is an example of something that is fungible, you can trade one for another and both represent the same value.

The easiest way to think about NFTs can be likened to digital ownership. Once you purchase an NFT, you have proof of ownership of that object. A lot of the current NFT landscape revolves around digital art, so the people likely to make money on NFTs are going to be the artists who create them, and those speculating on the NFTs value in years to come – much like art collectors today.

Q: How important is security when it comes to cryptocurrency investments?

A: With cryptocurrency gaining mass awareness, security is more important than ever. At a business level, we employ industry best practice. That means a mixture of hot and cold storage, two-step verification, encrypted web traffic, ongoing security reviews and much more.

As an industry, we need to work together and share best practices to protect investors. We need to give investors a reason to trust in the security of our services and the assets they’re investing in.

And for investors, we advise our clients to be vigilant with their information, never give out their passwords, use two factor authentication, a unique password, a secure internet connection, and always ensure they’re visiting the correct site.

Q: What are some simple technical trends you can teach our audience to look out for when trading? Is there a special investment style? Can you use stop losses?

A: Firstly, I can’t provide financial advice, however experts say the key is to buy low and sell high, so it’s important to monitor the market conditions to find good entry and exit points for your trades as well as having a clear strategy in place. Many investors we work with have also found success making investments over time, in a technique known as ‘dollar-cost averaging’.

Q: China is creating a digital currency… will this affect crypto land?

A: While this will certainly affect the cryptocurrency ecosystem within China, it’s unclear that it will have a significant impact on the rest of the world. China has always maintained a closed financial system, so it’s unlikely that it will have a large impact on other countries.

Q: Tax time is coming around fast. Is there anything we need to consider such as capital gains when trading crypto?

A: A common mistake of cryptocurrency traders is not declaring their trading activities when lodging their tax returns. All capital gains from cryptocurrencies like bitcoin and Ethereum must be included. The ATO is keenly aware of this issue and are reminding cryptocurrency traders of their obligations to the ATO.

Q: More broadly, many now speak about crypto in the same way as gold, acting as an inflation hedge, do you have any insight into this trend?

A: It’s true that inflation fears continue to grow. Recently, Goldman Sachs reported to their clients that they consider bitcoin a ‘risk-on’ inflation hedge. So it’s quite likely we will see investors continue to turn to bitcoin as an inflation hedge due to its fixed supply. On the other hand, as investors watch adoption grow, they are increasingly bullish on bitcoin’s long-term prospects.

Q: Recently Elon Musk tweeted that he would stop Tesla from using bitcoin as payment due to the massive amounts of energy used to mine bitcoin. We understand the vast majority of mining is done in China, is there a way perhaps this could be done using renewables or hydrogen energy with climate change in mind?

A: Absolutely. And it’s important to note that in China, the vast majority of mining is already done with clean energy. Miners in the Sichuan province are able to access incredibly cheap hydropower, one of the cleanest energy sources available. Secondly, more and more North American miners are moving to sustainable energy sources, including wind, solar, and hydrogen.

Q: And finally, we saw the recent announcement that 26 new cryptocurrencies were added to your exchange. Can you expand on that?

A: We’re always looking to provide interesting investment opportunities for our customers. One promising example being, Internet Computer. It’s a layer one blockchain that offers websites and apps a decentralised data storage solution, designed to compete with centralised alternatives like Amazon Web Services and Microsoft Azure. Another interesting token is Audius, a completely decentralised music streaming protocol that lets fans pay artists directly. It helps artists avoid paying middlemen who usually take 88 per cent of the revenue. With those new additions, we now offer well over 130 different cryptocurrencies on our platform.

Thank you for your time Shane, it was a pleasure speaking with you.

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