Don Guo first heard of bitcoin in 2015. Based in Singapore, he noticed a small community of investors that was creating a swelling buzz around this novel form of digital currency.
That same year, Guo became the Co-Founder and CEO of Broctagon, a Singapore-based fintech company that provides software to build financial exchanges. He was already heavily involved in the Forex (foreign exchange) and CFD (contract for difference) trading markets. Now, cryptocurrencies piqued his interest.
But Guo took his time.
“I actually went in late,” remembers Guo. “The first bitcoin that I bought was actually in 2018.”
“But ever since, we’ve seen a lot of evolution: more adoption, bitcoin being a mode of payment and transfer, and, of course, its use as a speculative investment.”
Broctagon has now added cryptocurrencies to the portfolio of financial exchange infrastructure that they provide, and Guo has since become an expert voice in Singapore’s bitcoin and crypto community.
That bitcoin has experienced a rapid evolution in Singapore is no coincidence. Guo says that Singapore’s “supportive” regulations, a naturally accepting population, and businesses’ instinct for adopting digital payments has made the island-state nation a bellwether for the future of bitcoin.
A survey in July 2021 found out that 93% of Singaporeans have heard of cryptocurrencies, while 43% said that they owned some. For comparison, only 6% of adults in the US said they owned a cryptocurrency.
It seems Singaporeans see bitcoin as more than just a speculative asset.
Who knows, a similar pattern could occur here in the UAE and GCC region. A survey from The National this May found that 33% of UAE nationals showed interest in cryptocurrencies.
Sarwa jumped on a video call with Don Guo to ask him some burning questions about the state of bitcoin, strategies to invest in it, and its future adoption and use as an actual currency.
Sarwa: An increasing number of financial analysts now think that bitcoin is a viable diversification tool for investors. At Sarwa, we are now adopting this perspective by offering the option to add bitcoin as part of our investment portfolios. What is your view of the diversification potential that bitcoin offers to investors?
Guo: I will use fund houses as an analogy. Right now, the total AUM (assets under management) for fund houses globally just hit $100 trillion. At the same time, the AUM for crypto funds just surpassed the $50 billion mark. While $50 billion sounds like a lot, this is just like taking $5 out of your $10,000 portfolio –– which is a pretty small amount. My take is that this global crypto holding percentage will only increase in size. The reason being is that cryptocurrencies are gaining more traction and attention, and institutional players are now coming in.
If you use that as a comparison for a personal investment, I would say “why not”? You’re not going to take a huge chunk of your portfolio and diversify into bitcoin; it’s just about managing the risk and rewards that you can bring in.
Sarwa: Some financial experts have recommended allocating 1% to bitcoin in personal investment portfolios; others recommend 5%, which is the allocation amount that we offer at Sarwa. How much would you recommend for holding bitcoin in a portfolio?
Guo: Right now, my crypto allocation is 5% of my investable assets. I have bitcoins, which I believe have a purpose, more use case and will rise in value over time. I also have ethereum because the ethereum network and protocol is a base foundation for a lot of blockchains. Together, this makes up about 5% of my holdings. Of course, this 5% fluctuates due to the movements of the cryptocurrency market, but that is the ideal allocation I aim for.
Sarwa: Walmart and Amazon recently put up job hires for experts in the crypto space. What does that tell you about bitcoin moving from being a speculative asset into a viable currency?
Guo: Big players are definitely trying to move into the industry. They’re trying to take a look, try it and do something new with it. In Singapore, we actually have eateries that accept bitcoin payments as part of a trial run, which started three years ago. In fact, regulators in Singapore are very open. I would say that Singapore is actually very beneficial for the growth of the global industry in the sense that the government here is quite supportive.
Sarwa: New investors should consider the risks involved with investing in bitcoin, and one of the largest is regulatory risk. What should investors understand about this type of risk and its potential impact on the price of bitcoin?
Guo: I don’t see regulatory risk in this way. Of course, regulatory interventions in major exchanges or in certain countries can bring about volatility and uncertainty. They bring about huge drops in prices of cryptocurrencies and bitcoin. But, as a matter of fact, every time this happens, bitcoin has recovered. I would say that regulatory risk applies more to crypto exchanges (such as Coinbase and Binance), which are most impacted by new regulations. But I do not think that regulatory risk directly shapes the fundamental price of bitcoin.
Sarwa: That’s an important distinction. One of the greatest benefits supporting bitcoin’s fundamental value is that it was created to be a finite resource, with only 21 million coins ever scheduled to be mined. How does this type of mining work?
Guo: Bitcoin mining is basically solving a mathematical equation by using computation. By solving these mathematical problems and helping to verify blockchain transactions in the process, the “miner” who is solving these equations gets rewarded with the cryptocurrency involved; in this case, bitcoin.
[Curious to learn more about what makes cryptocurrencies tick? Read “What is Cryptocurrency? A Beginner’s Complete Guide”]
Sarwa: Sarwa’s financial advisory board increasingly sees bitcoin as a potential “digital gold” due to its strong negative correlation compared to stocks and bonds. Considering this and bitcoin’s finite nature, do you also view bitcoin as a type of “digital gold” today?
Guo: I think it was definitely a smart move by Satoshi (the anonymous creator of bitcoin) to limit the amount of bitcoins to 21 million. This gives people a sense of security that it cannot be further manipulated by increasing the supply volume, which would directly impact value. With infinite supply, value tends to trend lower.
I would say that today bitcoin has become a “digital gold”. By having a finite supply with increasing demand, it is now comparable with actual gold. Bitcoin is a digital gold with potential to become more valuable and grow into more use cases over the long run.
[Want to know more about why bitcoin is now considered a good diversification tool? Read “Why Invest in Bitcoin? Understanding The Value of Digital Gold”.]
Sarwa: Barriers to safely invest in bitcoin are dropping across the world, with platforms like Sarwa and infrastructure technology like that provided by Broctagon. How are fintechs making bitcoin a safer asset to invest in?
Guo: Safety is a general challenge for all technologically based products, including cryptocurrencies. Crypto wallets are vulnerable to being hacked, but technology has continued to improve to battle hackers that attempt these breaches. With more regulations put in place, there will be more safety for investors as well.
These challenges can be solved with emerging financial technology, as well as better asset management systems. Providing this safety is not about the bitcoin resource safety, per se; it’s about continuously advancing technology and the fintechs that support it.
Sarwa: If bitcoin moves from being purely speculative to becoming more a medium of exchange, what would you say as far as greater adoption?
Guo: In Singapore, in particular, a survey showed that about 66% of the young population (defined as under the age of 45) own cryptocurrency. A lot of people are becoming attracted to bitcoin because of the way the price has moved over the past couple of years; this gives it a lot of speculative opportunities. Bitcoin is still more of a commodity than a currency. However, financial institutions are moving into cryptocurrencies, such as DBS, a major bank in Singapore, which launched their own cryptocurrency exchange allowing exchange users to buy and sell cryptocurrencies in direct relation to the banks. I think as bitcoin gains more attention, it will become more of the two worlds — commodity and currency.