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Future of crypto likely to be less volatile

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SMSF investors should not assume cryptocurrency’s 2017 extreme highs and lows will be a template for its future performance, a digital asset investment expert says.

SMSF investors considering investing in Bitcoin should not be deterred by the volatile nature of cryptocurrency as seen as recently as three years ago, a digital asset investment expert has said.

Kraken Australia managing director Jonathon Miller said cryptocurrency’s 2017 extreme highs and lows would not necessarily be a template for its future performance given how much the landscape had evolved in recent years.

“The story for cryptocurrency in 2021 is quite different to the story for cryptocurrency maybe three years ago,” Miller told selfmanagedsuper.

“Some [investors] might remember that crypto has had booms and busts and has been very volatile, and I think it’s very important to note that this is a very experimental space still, and remains an experimental space, but one thing that has certainly changed in the intervening years is the amount of more experienced hands in the market.”

Over the past three years more established companies have entered the cryptocurrency space, resulting in a higher level of professionalisation than investors might have experienced in the past, he pointed out.

“You’ve got the rise of institutional interest and the services around them have increased significantly, so you’re seeing big names entering the market and those people are taking long-term views on cryptocurrency as opposed to perhaps the more retail-oriented short-term views of 2017 where we saw some spectacular highs and spectacular lows,” he noted.

“I’m not suggesting that there won’t be volatility, but I think one thing that’s really important to note is that the landscape has changed quite a lot.”

In November 2018, the ATO noted it was expecting to continue developing its position on the tax treatment of cryptocurrency as the digital currency gained greater interest from average investors, as well as SMSFs.

Earlier that year, HLB Mann Judd pointed out SMSFs and other retail investors that had been disappointed with the low returns on their cash investments were looking to cryptocurrencies, but warned the asset class was riddled with risks.

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