Andrew Au explains cryptocurrency
Anyone who’s got their hands into a little bit of money has heard the umpteenth echoes of people telling them to invest it, and watch it grow.
Written by Ed Hitchins
In the past, we’d invest in stocks, mutual funds and on occasion, property as an effort to increase value. Over the past several years, a new idea has taken over the landscape of investment: Cryptocurrency.
From Bitcoin to Ethereum, Cryptocurrencies have been the wunderkind of the markets since it first launched in 2009. It is estimated that some 4,000 alt-coin currencies exist in the financial world. And while we have seen the highs of Bitcoin, jumping almost 1300% from the beginning of 2017 to earlier this year, we have seen it fall as well, going from a value of a high of $19,666 to a 70% drop to just over $5,000, also earlier this year.
But could a change in format and catering to millennials foreshadow another cryptocurrency boom? The Bay Street Bull asked Andrew Au, president of Intercept Group, a marketing company for millennials, if this could perhaps be the case.
Q: For those that don’t know, could you explain exactly what cryptocurrency is? How does it work?
Simply put, it is a digital only currency. Despite the pictures of branded currency we see on the internet, there is no physical presence.
Unlike traditional currency, Crypto is not branded by the government nor any financial institution. Only a single public ledger is used to record all crypto transactions. Once that transaction is verified by users of a crypto network, it is permanently posted and a matter of public record that cannot be edited or altered in any way, unless certain conditions are met. Copies of the ledger are stored and distributed across the cryptocurrency network, which maintains its accuracy and integrity.
This Peer to Peer concept isn’t new. It’s what music sharing services like Napster did in years past; but, we may question whether or not the community can be trusted to govern the network properly. For example, do we ever wonder who manages Wikipedia? Of course we do. Anybody can set up a new article or edit an existing one. However the integrity of the information is managed by the people who run it.
Q: What are some of the advantages you may gain from investing in cryptocurrency versus more traditional methods of investment?
There are several, including:
Big potential upside: With big risk comes big reward. With swings that range from 10-30% from week to week, you don’t need to invest a lot to yield a significant return compared to traditional investments.
Shorter Investment Cycles: Theoretically, you can generate and realize gains within a short period of time. Not without hurdles however, as there are buy/sell limits and timing delays to consider.
Greater Confidentiality: You choose exactly what information you share with the party you are transacting with. You no longer need to share intimate financial history to qualify your financial position.
Q: A recent survey suggested that younger millennials are more likely to invest in crypto versus a government bond. Why do you think that is?
Millennials are empowered with more choices and greater transparency. Their belief in cryptocurrency stems from the idea of a decentralized currency that isn’t controlled by institutions—the very institutions responsible for the 2008-2009 financial crisis. The underlying blockchain allows for a single public ledger where transactions are verified by ‘the people’, not the banks. Theoretically, an incorruptible model.
Q: What can current cryptocurrency/fintech companies do to gain the trust of people who wouldn’t normally think about that kind of investment?
Market maturity brings less volatility. People need to see more stability before they make material investments in cryptocurrency. No different than an influencer strategy in marketing, cryptocurrencies and fintech companies need the backing of influential investors to tell the public that it’s a viable investment strategy.
Som Seif closed a $45 million financing round earlier this year for his new venture Ethereum Capital. While this fund will seem to focus on broader industry applications for blockchain, it sends a message to the market that the technology is real and has big implications. He goes further to predict that tokens (form of crypto) will become a more efficient version of ETF’s which may displace the traditional model.
What particular group should cryptocurrency companies target in an effort to gain some of their lost ground?
Currently, cryptocurrency sounds like one big scam. Fundamentally, they need to build trust. Cryptocurrencies need to target influential investors to boost confidence in its viability.
Generationally, they need to double down on millennials. They’re the single largest living generation in Canada—9.1 million between the ages of 18 and 38. They’re also the quickest to adopt new technologies from virtual reality to mixed reality to artificial intelligence.In the finance industry we’re seeing the rise of robo-advisors who are doing the job of investment advisors. Millennials are driving this adoption.
Through a national millennial study my firm just completed, we learned that nearly 75% of millennials believe in the concept of cryptocurrency—with the single largest reason being the idea of a decentralized currency. And, 65% of millennials predict that it will displace traditional currency within the next 5 to 20 years.