One of the main pain points when investing in cryptocurrency is that “Crypto is complicated to purchase” and this is often a large barrier to investors entering the market. This problem is especially worse for investors located in Australia as we only have limited options when getting australian dollars into the cryptocurrency ecosystem. We’ve outlined these key issues below and then how investing in a cryptocurrency based hedge fund removes this risk.
Some key issues include:
- As an investor when you create an account on a cryptocurrency exchange you’re required to adhere to the Know Your Client (KYC) regulations before you can deposit or withdraw australian dollars.
- Difficulty in transferring “fiat currency” (Australian Dollars) to online exchanges due to restrictions and limits the banking system imposes on the cryptocurrency sector. Some of these include banks prohibiting transfers to cryptocurrency exchanges, prohibiting cryptocurrency purchases via credit card or setting daily limits on the amount of fund that can be transferred to exchanges. Banks are also charging fees to discourage money transferring from the banking into the crypto sector.
- Limited cryptocurrency exchanges that Australians can deposit currency into. Most international exchanges won’t accept cash deposits from non residents meaning we’re limited to using Australian based exchanges. These exchanges provide very uncompetitive buy/sell rates for cryptocurrencies.
- Australian based cryptocurrencies often do not have a buy/sell book meaning thy utilise a global cryptocurrency exchange to buy/sell for their clients. They often have a spread on the rate they offer their clients that is anywhere from 8 to 14%.
- The Australian based cryptocurrency exchanges have higher fees (usually between 1-3%) then the global cryptocurrency exchanges to buy/sell cryptocurrencies.
- Most crypto exchanges (certainly in Australia) have limited cryptocurrencies, meaning you’’ll need to open accounts on multiple exchanges to purchase a broad variety of cryptocurrencies. With over 1,500 cryptocurrencies you can often find yourself needing to have accounts with up to ten exchanges.
- Only a few cryptocurrencies have pairings to the AUD so in most instances your exchange will convert your AUD into USD at unattractive conversion rates. Alternatively, if you are using an Australian based exchange they will convert the cryptocurrency rates from USD to AUD and often the exchange rate used has a foreign exchange spread in the favour of the exchange.
- Many cryptocurrencies don’t have pairings to USD (or AUD) but are rather paired to Bitcoin (BTC) or Ethereum (ETH). This makes it hard to understand the AUD value of a coin you’re purchasing. Ie 1 Ripple = 0.00000012 Bitcoin.
When you invest in an Australian based cryptocurrency hedge fund you do this by paying Australian dollars. This means that all of the risk outlined above are removed as you never have to worry about physically purchasing cryptocurrency.
When I personally started investing in cryptocurrency, I was losing between 8% to 14% of my initial investment in the process of moving australian dollars into the crypto ecosystem and purchasing a cryptocurrency. So by the time I’d converted AUD to a cryptocurrency a AUD10,000 investment would have been worth AUD8,600.
If you were to invest AUD10,000 in Cryptochain Capital then your investment at the time of deployment in the fund would be AUD10,000 with no entry or exchange fees.