Reconsidering cryptos
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Reconsidering cryptos

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Huobi Group’s Ciara Sun says that cryptocurrencies are continuing to fascinate investors looking to diversify their portfolios

Huobi Group is global blockchain company spanning various upstream and downstream enterprises, providing safe, secure and convenient cryptocurrency trading services to millions of users across more than 130 countries.

In line with its mission of “Opening Doors to Digital Assets for Households Worldwide”, Huobi has established a blockchain ecosystem with 10 business lines, a world-class security system, and local operation teams around the globe – a swift rise in a relatively new market segment.

Huobi Global, launched in 2013, is the company’s spot trading platform and ranks as a top three exchange by daily volume, accounting for more than 50% of global Bitcoin trading volume in 2016. Its native token, Huobi Token (HT), also ranks in the top 15 cryptocurrencies by market cap.

Ciara Sun is the chief of staff and head of global business at Huobi Group. She says the rapid growth of the crypto space is showing no signs of slowing down. “The cryptocurrency infrastructure for traditional investors is probably only three years old in all respects. Bitcoin has been around for going on 11 years, but 2017 was a real watershed moment for traditional investors. These three years have seen massive growth in the infrastructure of crypto and it is ready to handle a good deal of traditional investment.”

The interplay between traditional investment and the newness of cryptos bears further scrutiny, says Sun. Most obvious are the numerous parallels between new cryptocurrencies and gold – one of the world’s oldest.

“Cryptocurrencies are a very interesting concept as an asset class,” she says. “It is their broad application and designation that makes them as applicable to being a currency as being a ‘digital gold’. Bitcoin, as the biggest and most popular cryptocurrency has of course been likened to digital gold, and the reasons behind this are more than just anecdotal.

2017 was a real watershed moment for traditional investors

“Bitcoin started out as an intended currency, but quickly aligned itself to be more of an asset class when the mainstream saw its volatility made it an exciting, if not risky, investment. But, because this asset class has no controlling body — like an OPEC in the Oil space — it has grown and evolved to be even more like gold.”

Another parallel is finite volumes, says Sun. Gold’s value stays relatively stable in part due to scarcity, measured by the stock-to-flow ratio. This ratio, measured by dividing an asset’s total circulating supply by the amount produced annually, sees an asset with a stock-to-flow ratio of 50 take 50 years at current production rates to double its stock levels. The stock-to-flow of Bitcoin – prior to a recent mining reward halving, which cut the supply entering circulation by 50% – is 27.55, however after the halving it jumped to 55.94.

How to invest in crypto

How to treat a crypto investment needn’t match a strategy for old-school gold, however. When it comes to fitting it into a portfolio, Sun says there are many options and an increasing array of products, “depending on how adventurous an investor wants to be.

“The growth in futures trading in cryptocurrency has been staggering,” notes Sun, “and at Huobi we even saw the launch of our perpetual swaps product receive great uptake.

“This product became the biggest in the cryptocurrency space in a matter of weeks from launch and we saw from our research that around 40% of these clients were traditional investors.”

Nevertheless, Sun urges caution to traders new to the assets. “Bitcoin could well make an investor a lot of money, but it is important to understand the asset and get to grips with it before diving head first into it,” she says.

“Bitcoin can be a great performer, but it is also well known for its volatility, up and down.” She adds, “it does also certainly open new doors, but the way it takes a traditional portfolio needs to be experienced, learnt, understood, and then leveraged.”

That volatility – as well as security breaches and scams – has led many to be cautious around crypto investments, and Huobi considers allaying such fears a key focus for the company. “We understand that it falls onto the shoulders of exchanges like Huobi and other third-party crypto services to make the space much more safe and secure,” says Sun, who cites the company’s Star Atlas analysis tool as one example of the checks crypto companies are placing to monitor and control illicit activities within cryptocurrencies

“There was a time when people were wondering if Bitcoin and the cryptocurrency space would be a passing phase. That is well and truly over,” she notes. “The best indicator of this is the uptake of blockchain technology by all the world’s biggest banks, enterprises, and companies, as well as now governments are getting involved.

“The space is not going anywhere but up! And that is why it is still so exciting to be a part of it.”

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