“Bitcoin has been on a steady decline in 2018, but I think the cycles in cryptocurrencies are much shorter than in traditional markets, mainly because the trading is 24/7,” he added.
“So in 2019, we’ll see a lot of companies come up with new ideas and there will be a lot more use cases for cryptocurrencies,” he said. “I believe this year is a good time to invest in cryptocurrencies, especially that the markets are slowly starting to recover and showing that it bottomed out in the last couple of months,” he argued.
He said that prices suffered in 2018 because of the dramatic increase in prices in the prior year.
Data from Eikon shows that bitcoin, the world’s most popular cryptocurrency, lost 72.5 percent of its value against the United States dollar last year, ending the year at $3,693.30. In 2017, it had begun the year at $997.75, and peaked in mid-December at $19,187.70, before falling back to end the year at $13,880. So far this year, however, its trading has been range-bound and prices at the end of Wednesday were marginally higher than last year’s close, at $3,799.33.
Alphabit is a cryptocurrency fund domiciled in the Cayman Islands and registered with the Cayman Islands Monetary Authority (CIMA). The fund uses a blend of manual and automated trading strategies, as well as investing in a portfolio of Initial Coin Offerings (ICO). The fund was established in June 2017, according to Al Darmaki, and its strategy is focused on investing in early seed rounds into blockchain startups, and trading liquid coins and currencies like bitcoin.
On the geographies of focus for Alphabit, he said that the company was looking at two projects in the United Arab Emirates, “but mostly it’s global investments”.
“2018 was a very tough year but we managed to beat our benchmark, which is bitcoin, so we consistently over-performed bitcoin performance,” he said.
“I think 2019 will be a very interesting year for the industry. There are a lot of opportunities and I can see that the markets are slowly recovering,” he added.
Rising GCC interest
Al Darmaki said there is increasing interest both in cryptocurrency and in blockchain technology in the UAE, “because the Dubai government aims to have most of its government services using blockchain by 2021”.
“ADGM (Abu Dhabi Global Market) issued a framework around cryptocurrency regulations. And ESCA (UAE Securities and Commodities Authority) is looking into issuing regulatory framework for crowdfunding using blockchain through ICOs, as they want treat them as securities.”
“So I think regulation and legislation framework in the UAE is developing very fast which gives investors the confidence that the government and regulators are trying to protect them, and there is more interest because of the regulation that’s coming up. So I believe interest will keep growing at an exponential curve,” he said.
In April last year, the government of the UAE launched its Emirates Blockchain Strategy 2021 that seeks to capitalise on blockchain technology and place up to half of government transactions onto a blockchain platform. The strategy projects annual savings of 77 million work hours, and 11 billion UAE dirham ($3 billion) in documents and transactions processed routinely. (Read more here).
Abu Dhabi Global Market, the financial center in the UAE capital, launched its crypto asset regulatory framework for the MENA region in June last year, providing a set of rules governing spot trading of crypto assets by exchanges, custodians and other intermediaries based within the international financial centre. (Read more here).
And the SCA approved a plan to recognise Initial Coin Offerings (ICOs) last year, stating that it will finalise rules by mid-2019. (Read more here).
“In the region, Saudi Arabia and Bahrain are definitely looking very closely at cryptocurrencies. The Bahrain Central Bank is working with an exchange to set up a regulated exchange in Bahrain. In Saudi, I know that they banned trading bitcoins but they are investing in the technology and recently there was an announcement between the UAE central bank and Saudi central bank to pilot the cryptocurrency payment for cross-border payments. So in the region overall, there is a lot of interest and it is growing,” he said.
Earlier this month, the Saudi central bank launched a regulatory ‘sandbox’ that allows local and international financial technology firms to test new digital solutions. Permission to work in the sandbox environment has already been granted to seven companies looking to provide digital payment services, and to 11 local and international banks. (Read more here).
This Tuesday, Bahrain-based cryptocurrency exchange ‘Rain’ was announced as being the first cryptocurrency exchange to graduate from the Central Bank of Bahrain’s (CBB) Regulatory Sandbox and is now in the process of applying for the relevant license. (Read more here).
Bridging the talent gap
The key element that prevents the industry from taking off in the region is education and awareness, according to Al Darmaki.
“I don’t think that there are many people in the region that are experts in blockchain technology itself and also in trading or investing cryptocurrencies or in investing in blockchain startups,” he said.
Last month, the UAE and Saudi Arabia announced the launch of common digital currency, 'Aber', to be used in financial settlements between the two countries. The central banks of the two countries said they planned to carry out proof of concept studies and pilot projects to assess the use, feasibility and the risks involved of using blockchain for cross-border payments. Six banks from Saudi Arabia and the UAE will participate in the launch of the project. (Read more here).
On the recent launch of the common digital currency between the two countries, Al Darmaki said that it is a very positive initiative for the industry in the Gulf region.
“I’m sure as soon as they finish the pilot, they’ll see that there are a lot of benefits and they’ll eventually use it on a wider scale,” he said.
(Reporting by Nada Al Rifai; Editing by Michael Fahy)
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