Everything You Need to Know About Crypto, Explained by Byron Goldberg from Luno

Bitcoin, via Pexels

Luno functions as a cryptocurrency brokerage and E-wallet, correct?

I wouldn’t call it an e-wallet in the traditional sense that e-wallets exist in Malaysia and Indonesia, or the world. Luno makes it safe and easy to buy, store and learn about cryptocurrencies, like Bitcoin, which means that you will deposit your fiat currency, being your Australian dollar into your Bitcoin wallet.

The fiat essentially sits in there until you make your purchase of Bitcoin. Once you buy your Bitcoin, it becomes your Bitcoin wallet, it sits in your Bitcoin wallet, you can then move it, you can track you can trade it, you can transfer it, you can send it, you can save it and earn interest.

Please give us a breakdown of the demographics, and what they tend to spend it on.

Most users are male. And that’s a trend we witness worldwide. It’s widely known that crypto adoption has been very skewed to males. Males skewed towards the age group of 30 to 45. Which would make sense as they are people with higher disposable income. Essentially, if you see it as a risk, they can afford to take the risk. Most people buy Bitcoin and hold it.

How does Luno work? Are you partnered with another institution or does your organization mine its bitcoins?

We have a wallet, an exchange, and a savings wallet. Each of the three products has a different purpose. The wallet is a very simple and easy way to buy Bitcoin. So you’ll deposit money into an Australian dollar wallet, and you will click Buy Bitcoin and you choose if you deposit $1,000 you click that you want to buy $1,000 worth of Bitcoin. And Bitcoin gets purchased and it’s in your wallet, boom, done.

It is a common misconception that you have to buy a full Bitcoin. Bitcoin is divisible by 100 million, and you can buy $10, $5 as much as you can afford. So that’s the first product is the wallet, you can also send Bitcoin to other addresses. With Luno, you can send it to other Luno users, which is free when you do that. And it’s instant as well.

The exchange for sophisticated investors, you will need to know how to place market orders and limit orders, and stop-limit orders. Now on that exchange, there are willing buyers and willing sellers. So someone with Bitcoin will come on to the exchange, if they want to sell, they will sell it on an exchange. If someone wants to buy Bitcoin, they will go with dollars onto that exchange, and they will offer to buy Bitcoin. That’s pretty much the basis of the exchange. So we’re not connected to other parties for the exchange.

An exchange will have pairs. And a pair is, for example, in Australia, Australian dollar to Bitcoin. There is a market where there are buyers and sellers buying Ethereum for dollars, or selling Ethereum for dollars, and the other way around with Bitcoin.

The exchange allows you to set your price, if the Bitcoin price is currently $36,000, you can say, Hey, I don’t want to buy Bitcoin at 36,0000. If the price drops to 30k, that’s when I’ll buy. And you can put in an order on the exchange to only buy at that price.

Quite recently we announced that we’ve released a coin called USDC, which is the US dollar coin, which is and I’ll go into stable coins a little bit later. But what that means is we’re going to have me do have a Bitcoin and USDC pair. It’s available on all of our apps except the Malaysian one at the moment, USDC hasn’t been approved yet in Malaysia, but anybody can trade that global pair. So you can buy bitcoin for USDC or sell USDC for Bitcoin.

Liquidity from an exchange point of view is going to massively increase, which is very exciting for our traders. The third product, which was also recently released is a savings wallet.

This hasn’t been released yet in Malaysia. But when you buy Bitcoin on either the first or the second product or wallets or the exchange, you will have a Bitcoin that will sit in your wallet. You can move that over into a savings wallet where you will earn up to 4% interest on your Bitcoin. Now in a world of low-interest rates, and currency devaluing fears, finance or government currencies, being able to number one hedge against that government risk. And number two earn interest way higher than a bank is a product that we’re very excited about.

Let’s discuss some major recent events. I’ve been seeing a lot of institutional adoption. I’ve tried to read up on Ripple but it still doesn’t make a lot of sense.

I’ll start with the institutional adoption. I’m sure you’ve seen companies around the world, Square and MicroStrategy and a few insurance companies have bought Bitcoin, to put on their balance sheets, instead of having US dollars as a hedge.

I believe that over the next few years, and so do lots of investors like Ray Dalio, who runs the biggest or used to run the biggest hedge fund in the world, and Cathie Wood of Ark Investments, Elon Musk, everybody is bullish on Bitcoin number one because it’s a decentralized currency. Because of that decentralized nature, it’s not controlled by the government, because there’s only 21 million because they’ll never be more printed.

When you compare Bitcoin to the dollar, where the total opposite can happen, more money gets printed daily, the Fed in America printing more money, they’re discussing a massive next order. Australia announced they’re going to start buying government bonds.

Bitcoin becomes something that is a hedge to these government currencies. Now, some companies, some institutions have started adopting that to say, hey, we’ve got 1,000,000,002 billion 100 million 50 million on our balance sheet, but we don’t want that to get devalued against the US dollar or the Australian dollar. So that is pretty much the main reason I feel that institutions are buying into Bitcoin.

If Bitcoin goes down to $25,000, people will start buying again, institutions will say, hey, it’s probably even worth the risk to start buying crypto or Bitcoin as a hedge because the price has just dropped so much. There’ll be a level of FOMO. The market cap of gold is around $10 trillion. And Bitcoin gets to 30% of that market cap. Bitcoin should be worth about $140,000 per Bitcoin.

So that’s not if it overtakes gold. That’s really if it gets to 30% of Gold’s value 140,000 from where we are at the moment, I think that’s close, or over 300% above where we are. For institutions, it is a great hedge. And it’s also besides being a hedge, nobody buys gold to make 300%. Right? You buy hits in inflation, but imagine being able to say, hey, you’re buying gold, or you’re buying Bitcoin to be an inflation hedge, but it also has this crazy upside, because nobody’s people have adopted it, but it’s so low on the adoption curve, that we have the chance to get it early. Now, let’s discuss XRP.

Something about undeclared securities and they’re not technically supposed to be called the cryptocurrency. That’s all I managed to gauge.

Ripple created XRP. They launched an ICO and I can’t remember how many dollars they raised. It could have been close to a billion dollars. And people now have this token, this XRP token.

Now from my understanding, the SEC, which is an American securities exchange commission in America, has alleged the XRP token is an unregistered security offering, a share of the equity.

And if that’s the case, equities or shares can only be listed on certain regulated exchanges, so the NASDAQ or the New York Stock Exchange, but XRP is listed on Coinbase. It’s listed on Luno, it’s listed on by Binance. So basically, what that would mean is only in America, companies that list XRP would have to drop. Coinbase suspended trading of XRP, just in case it does get defined as equity as a security, they are not allowed to be trading it. So that is pretty much what it is, in a nutshell, is just an allegation for now. They’re going to fold it back with lawyers.

I think the case may go on for a while. But that is pretty much what’s happening with ripple and XRP. Again, it is U.S-specific. Countries do watch what other countries do. South Africa, Australia might say, hey, it was classified as security in America. So we’re going to classify it as a security. But for the time being, even got classified as a security tomorrow. It’s only a security as defined in America, American exchanges.

We don’t operate in the States, that wouldn’t affect us, but we’d keep our eyes open and make our own decisions. But for example, in Malaysia, the law around cryptocurrency exchanges, if I’m not mistaken, and prescribes that digital currencies can be securities, so things based on each jurisdiction, things can be different.

I’ve also been seeing a lot of launching of crypto debit and credit cards to counter the problem of people holding Bitcoin in waiting for the value to increase instead of spending it?

When you go to the shops, things are still priced in dollars at the moment, at least for now. So what these crypto credit cards and debit cards allow you to do is spend your Bitcoin at a shop. And what’s happening in the background is if you want to buy a can of Coke, you pay $3 from your Bitcoin account, but the exchange will be selling that Bitcoin into three and a half dollars. And then that three and a half dollars get spent. So what it is, is it’s a way for people to still be able to hold Bitcoin and hold crypto and be able to have the benefit of spending it as well. Instead of having a lot of cash in your bank account to make sure you can spend money at the shop, you can be fully invested in crypto, but still, go to the shops and spend Bitcoin. I predict cards will become more widely available with exchanges and wallets as more and more people adopt cryptocurrencies.

What is Luno doing to appeal to risk-averse investors?

The USDC, US dollar coin is the US dollar that has been tokenized. For every dollar that you have in USDC, there will be $1 stored in a vault somewhere. People that want to invest in crypto, and they don’t want to invest in Bitcoin or Ethereum, can buy a USD coin pegged one to one US dollar. So for somebody who’s more risk-averse, they could buy something like that. And in the future, they can earn an interest in those. But for somebody that doesn’t want to have the risk of cryptocurrency fluctuations, I would just personally presume that they wouldn’t want to buy crypto, at least now, they wouldn’t want to invest a lot of money into it. So yeah, if somebody was very risk-averse, they didn’t want to buy crypto. They don’t have to.

What are the interesting trends Luno has uncovered in 2020?

The exchange volumes were over 350% higher than the exchange volumes were at the peak of 2017. This means December 2017 was the last all-time high. Now in January, or at the end of December 2020. The exchange volumes globally were over 350 times higher. More people are trading, the amount that’s being traded is higher, as it becomes more widely accepted.

More people are adopting crypto. The second one is last year at some stage, the total crypto market cap passed $1 trillion. That could be outdated. It could be higher than that today. I’ll tell you right now. The market cap today is above $1 trillion. So that’s also super cool. super interesting. I’m not sure if that happened before.

Another thing is that we’re only on 78% of the Bitcoin supply. It’s classified as illiquid, which means that long-term holders are buying and holding Bitcoin. When Bitcoin is illiquid, it means it’s often exchanged and takes some time and effort to be able to send it back onto the exchange to sell it. So when it’s illiquid, it is assumed that that is being held for long-term purposes.

What else have we uncovered? I think something that we can say we look at in 2021 is stablecoins, which are central bank digital currencies. I know China has been toying with one. I think Seychelles has created one. And I think 2021 will see more governments moving over to central bank digital currencies. And even if they don’t roll them out, we’ll see more countries that are testing them. Like I mentioned earlier, more institutional fear of missing out. So the institutions will start piling in. And then there’s the potential that sovereign wealth funds also start buying crypto and Bitcoin. Governments will potentially start saying hey, why aren’t we getting on this? We understand that there’s a risk that other countries default on our debt, or we default on our debt. So why don’t we get into crypto or Bitcoin as well?

Why do you think cryptocurrency attracts more negative coverage, such as UBS Wealth warning crypto prices can go to zero and Research Affiliates claiming price manipulation?

So the first reason is it wasn’t created by the institutions. They don’t trust or have a true understanding of it. It’s very hard for crypto exchanges and crypto companies to get bank accounts. And that’s not because illegal things are happening, it’s because the banks don’t understand how it works, and they kind of are not willing to learn how it works. Some banks are our partners and we enjoy working with them but some aren’t willing to learn how it works.

You’ve got people like Ray Dalio and the Guggenheim fund, MicroStrategy, Michael Saylor that started JP Morgan now in 2017, go and look at what Jamie Dimon had to say about Bitcoin, and in 2020. He did a full 180, they’ve launched their own crypto token that they are experimenting with internally. The perception of Bitcoin and crypto is changing, but it has been negative for so long. Because people are afraid of new things, and especially when the trend started before the institutions could get in. All those crazy gains from when Bitcoin was valued as a fraction of a cent now bitcoins worth $35,000 people. Some people might have a bad taste in their mouth that they maybe never got in that early. At the same time, Bitcoin has been seen to go from $20,000 to $10,000 overnight, right. So, that volatility in that craziness does warrant a warning from news agencies and whatnot. But I think the tide has turned and I think institutions are not only going to start being less negative towards it, but they’re going to close on adopting it as well.

What are the advantages or disadvantages of cryptocurrency compared to alternative forms of crypto investments such as Bitcoin ETFs?

So in terms of benefits. I would rather say one of the benefits of cryptocurrencies versus fiat currencies, or cryptocurrencies versus an ETF that holds Bitcoin.

As an example, if you buy Bitcoin you can invest it in the savings wallet and you can earn up to 4% in interest so that you can do lots of other places.

But number two. Bitcoin, like I mentioned about what was said in the white paper, to transact with people and to be spent and to be used in everyday life. If you buy bitcoin through an ETF or the Grayscale Bitcoin Trust which is doing extremely well in America. You can’t send that Bitcoin. It’s being managed by somebody else.

When you buy Bitcoin yourself, it’s in your wallet. Like I mentioned earlier if I want to send it straight away. The value might be volatile. So, how to, how did the crypto community, adjust that they created a stable coin. So I can buy a stable coin. I can send it from Australia to Malaysia in five minutes instantly. There’s no volatility. But you’ve got the benefits of cryptocurrency. So, there’s no advice, whether you should buy as an ETF or buying crypto.

But one thing that I do say that lots of people miss out on but it takes education and time learning is this is a new financial system. So lots of people see Bitcoin as crypto as a way to make a quick buck, and investment and that’s it. But it’s a new financial system it’s more than just an investment it’s more than just a way to make money, it’s a way to send money to people as a way to write smart contracts and hold collateral, and have zero counterparty risk in a trade or a transaction with a centralized financial institution that number one takes a cut or takes a percentage of the trade.

This is a new financial system now. We went from writing letters on paper to sending faxes to sending emails, and we went from. I didn’t even know it was what there was before landlines, but we went from Morse code to telegraph cell phones landlines to cell phones, but money has essentially gone from gold to money and the system is digitizing that money. Bitcoin and crypto is the next step. It’s that next total adjustment in the way we use and utilizes money.

What’s something a beginner should know about cryptocurrency?

To always do your research. There are scams out there, be vigilant. Always be aware of somebody telling you they can make a. They can make a quick buck or they can make you crazy profits. So be aware of scams also, if someone says hey buy Ripple or buy Bitcoin or buy that, make sure that you understand it. There’s now the opportunity in 2021, to be able to earn interest on that as well. And if crypto goes up to 40% a year for the next couple of years, you’re also earning interest, you really can compound your money so for early young investments.

Special thanks to Team Luno

Note: This interview has been edited for clarity and brevity.

Here’s an article Byron wrote about how Bitcoin came to be:

This article is for entertainment purposes only. It is not intended as financial or legal advice. Consult a financial professional before making any major financial decisions.



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Lynette Hew

Lynette Hew


B.A in Economics and Minor in Chinese Studies @unimelb. I write about art,economics and finance.