Mon, 13 Jul 2020

The unique trading conditions created by the coronavirus pandemic have accelerated the rise of cryptocurrencies, with lockdown trends among traders in Malaysia demonstrative of how perceptions are changing towards digital assets. While cryptos have been growing steadily in popularity in Malaysia in recent years, the dire performances of mainstream markets have given crypto markets new relevance in the opening half of 2020.

Many traditional investment strategies have become unworkable as the pandemic has sent stock indices spiraling downwards and limited the upward mobility of most fiat currencies. In April, two of Malaysia's government-approved crypto exchanges both experienced growth in local trading volumes ranging between 30% and 40%, a dramatic surge propelled by people's desire to find a safe haven in which to store value.

A time for traders to diversify

Many Malaysian traders have sought to diversify their portfolio and invest in cryptos for the first time, with Malaysia's crypto exchanges also witnessing a rise in new users signing up during the lockdown. The recent popularity boom of cryptocurrencies is not a phenomenon unique to Malaysia, given that the boom is a product of the effects of the pandemic that have been felt worldwide.

While the failure of mainstream markets has inherently made cryptos more attractive, there are also practical reasons for traders turning to cryptos during the pandemic. The new provision of weekend trading options means that cryptocurrency traders have access to markets all week, proof of digital assets' rising relevance. In the past, bitcoin traders had to wait until Monday's open to react to weekend news and adjust their position, but the availability and ease of Sunday trading gives more flexibility than ever - flexibility that is vital in a pandemic.

The possibility of weekend crypto trading is not the only practical factor driving traders towards cryptos. As demonstrated by the increase in new user registrations at Malaysian crypto exchanges, people have found themselves with more time to focus on new pursuits during the lockdown. Given the digital nature of crypto trading, getting to grips with currencies like bitcoin is a challenge well-suited to lockdown.

An openness to cryptos

Malaysia is not necessarily on the cusp of the mass adoption of cryptocurrencies, given that only 2% of the country's 30 million population are estimated to have a reasonable appreciation of cryptos' workings. However, the increased appeal of crypto trading during lockdown reveals a willingness to learn. Malaysia has already positioned itself as a country open to the potential value of cryptocurrencies, with bitcoin ATMs popping up in major urban areas.

These bitcoin ATMs may become increasingly commonplace in the coming years. These ATMs make it straightforward to buy and sell bitcoin, while their presence on the street further normalizes cryptocurrency trading. The number of bitcoin ATMs worldwide surpassed the 7000 mark in March 2020, with 75 countries contributing to that figure. Asia is surprisingly lagging behind in those contributions, hosting just 1.8% of crypto ATMs despite the region's general openness to digital coins.

Malaysia's bitcoin ATMs and rising trading volume reflect that receptiveness to cryptos. While most of the habits picked up during lockdown will be lost once the world begins to operate more normally once again, the growing appeal of cryptocurrencies should be one thing that endures. It will be interesting to recalculate in a few years the proportion of the Malaysian population that understands cryptocurrencies - current trends suggest that it will be much more than 2%.

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