Vir­tual money shift­ing global trad­ing trends

Business Day - - COMPANIES - Hanna Zi­ady In­vest­ment Writer zi­adyh@busi­nesslive.co.za

Cryp­tocur­ren­cies are the most un­der­val­ued as­set class in the world, says Farzam Eh­sani, leader of Rand Mer­chant Bank’s blockchain ini­tia­tive.

The com­bined mar­ket cap­i­tal­i­sa­tion of all cryp­tocur­ren­cies was only about $120bn, Eh­sani said on Thurs­day at the Busi­ness Day/Fi­nan­cial Mail In­vest­ment Sum­mit, held in part­ner­ship with Old Mu­tual Wealth.

By com­par­i­son, the mar­ket cap­i­tal­i­sa­tion of all stock mar­kets is about $68.5-tril­lion, ac­cord­ing to fig­ures from the World Fed­er­a­tion of Ex­changes.

Bit­coin, the most pop­u­lar of the more than 800 cryp­tocur­ren­cies in cir­cu­la­tion, has gar­nered con­sid­er­able me­dia at­ten­tion in 2017, not least be­cause of its colos­sal in­crease in value. The price of a sin­gle bit­coin has surged from $605 to $3,487 over the past year, lead­ing scep­tics to la­bel it a “bub­ble”.

This week, The Guardian news­pa­per re­ported JP Mor­gan CEO Jamie Di­mon as say­ing that bit­coin was “a fraud that will ul­ti­mately blow up”.

Bit­coin en­ables users to by­pass banks and pay for goods and ser­vices over the in­ter­net on a peer-to-peer ba­sis. Although not recognised by fi­nan­cial reg­u­la­tors, they are tak­ing it se­ri­ously, with the South African Re­serve Bank re­cently es­tab­lish­ing a fin­tech pro­gramme to ex­plore the im­pli­ca­tions of vir­tual cur­ren­cies and other fi­nan­cial tech­nolo­gies for fi­nan­cial reg­u­la­tion and ac­tiv­i­ties such as lend­ing and in­vest­ing.

“Most peo­ple in­vest­ing in cryp­tocur­ren­cies aren’t nec­es­sar­ily long crypto, they are short fiat [cur­ren­cies].” Fiat cur­ren­cies in­clude the rand and dol­lar.

Tech­nol­ogy such as blockchain, off which bit­coin oper­ates, would pro­mote greater trans­parency in and ac­cess to fi­nan­cial mar­kets, as well as bring down costs, Eh­sani said in a panel dis­cus­sion.

Com­put­ers and al­go­rithms al­ready ex­e­cuted more than 50% of the JSE’s trades and this would in­crease to 100% in time, said Shaun Nicholson, head of South African fi­nan­cial mar­kets at IRESS.

Deal­ing rooms were in­creas­ingly re­cruit­ing tech­nol­ogy spe­cial­ists and com­puter pro­gram­mers rather than tra­di­tional stock­bro­kers, he said.

Au­to­mated on­line fi­nan­cial ad­vice was gain­ing trac­tion, with fi­nan­cial ad­vis­ers us­ing the tech­nol­ogy to bet­ter ser­vice their clients.

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