Cryptocurrency’s evolution

Navigating the cryptocurrency landscape.

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Kobus Kleyn, CFP®, Tax and Fiduciary Practitioner, Kainos Wealth
Kobus Kleyn, CFP®, Tax and Fiduciary Practitioner, Kainos Wealth
Kobus Kleyn has published over 200 articles and authored four books. He is a multiple award-winning professional and holds eight memberships with professional associations. His most recent awards were lifetime achievements awards from the FPI (Harry Brews), The Million Dollar Round Table (Top of the Table Life Membership) and Liberty Group (Life Membership) in 2021/22.

The complimentary publication of CryptoMania, launched on 1 April 2018, offered an independent analysis at a time when digital currencies were capturing global attention. Six years later, the sector has matured dramatically, characterised by technological stability in leading cryptocurrencies like Bitcoin and Ethereum, regulatory evolution and economic indicators’ increasing influence on crypto valuations.

Regulatory landscape within South Africa

In South Africa, the official recognition of cryptocurrencies as an asset class heralds a new era of regulation and oversight. The requirement for traders and advisors to register with the Financial Sector Conduct Authority (FSCA) introduces a formal framework, integrating crypto assets into the financial mainstream and promoting responsible trading and advisory practices, with some consumer protection. The irony is that Bitcoin and other cryptos were designed to operate in a decentralised ecosystem.

The tax treatment of cryptocurrencies by the South African Revenue Service (SARS) offers a clear example of how regulatory bodies are adapting to the unique challenges presented by digital currencies. SARS has delineated that income generated from trading or investing in cryptocurrencies will be subject to taxation, with the nature of activities determining whether capital gains tax or income tax applies. Specifically, gains realised from the disposal of crypto assets are liable for capital gains tax, while income from mining activities or trading in the ordinary course of business falls under income tax. This approach ensures that crypto investments are treated with a level of scrutiny comparable to traditional financial assets, promoting transparency and fairness in taxation.

The convergence of cryptocurrencies

Its responsiveness to traditional economic indicators, such as interest rates, is an intriguing development in the cryptocurrency market. This trend indicates a shift towards mainstream financial behaviours, challenging the original decentralisation ethos of cryptocurrencies. The alignment with economic indicators suggests an increasing maturity of the market.

Investment strategies

The adage of spending time in the market, rather than attempting to time it, is particularly relevant in the volatile crypto market. Historical peaks and troughs, including the record high in 2021 followed by significant corrections, underscore the value of patience and strategic investment.

ETF activism

The recent record highs in Bitcoin are attributed to the activism surrounding cryptocurrency ETFs. ETFs have played a pivotal role in making cryptocurrency more accessible and palatable to traditional investors, enhancing market liquidity and stability. The halving event, a built-in feature that reduces the reward for mining Bitcoin, is keenly anticipated for its potential impact on supply and, consequently, price.

Looking ahead 

The cryptocurrency market’s journey underscores its transition from a speculative novelty to a complex financial ecosystem. The regulatory advancements in jurisdictions like South Africa, coupled with the market’s responsiveness to economic indicators and the strategic involvement of ETF activists, paint a picture of a maturing market. As the sector continues to evolve, navigating the interplay between innovation and regulation, traditional financial principles and cryptocurrency-specific dynamics will be crucial for investors seeking to capitalise on this digital asset class’ opportunities while mitigating its inherent risks.

For those keen on delving deeper into the transformative journey of the cryptocurrency market, download a copy of CryptoMania from www.bluechipdigital.co.za or scan the QR code.


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