For those of us not so invested (pun intended) in finance or the stock market, the rise of cryptocurrency can feel like a confusing blur. All of a sudden, it’s gone from being a wildcard, the volatile new kid on the block, to a popular investment that practically everyone seems to have up their sleeve or as part of their financial portfolio.
Crypto has grown so much that there are YouTube channels and podcasts devoted to the pursuit of making virtual coin, and 4 million Aussies are set to purchase some form of cryptocurrency in the next 12 months, according to the Australian Financial Review.
Need an explainer to keep you up to date on the world of crypto? We asked Bachelor of Actuarial Science students Angus Jenkins and Brock Hudson to give us the run-down on this currency and its many intricacies, and to provide some insight into their experience participating in a cryptocurrency competition. Yes, you heard that right – with $15,000 on offer to the winner, crypto trading has officially become a competitive sport.
What is cryptocurrency? Is it affiliated with the stock market?
“Very simply, cryptocurrencies are digital assets that are built off blockchain technology,” Angus says. “These assets have different functions and purposes, and are all tradeable in a secure and often decentralised manner.”
The security behind cryptocurrency means that it’s very difficult to counterfeit, making it – in theory – more reliable than traditional means of currency. However, this isn’t actually the case, as crypto’s success relies on a number of external factors, including how easy or difficult it is to purchase something with it, its time in the market and who’s buying it – the same as stocks.
“Cryptocurrency can be thought of as an alternative to stocks from an investor’s perspective. Although crypto doesn’t represent companies like the stock exchange does, a cryptocurrency has the ability to move up and down in price just like a stock,” Brock says.
Why is crypto so popular all of a sudden?
If it seems like cryptocurrency has infiltrated mainstream conversation – and financial portfolios everywhere – you’re not alone.
“I first began looking at cryptocurrency in 2017 in my final year of high school, however, I didn’t think much more of it until last year, where stories of people making millions in short periods of time started to surface,” Angus says.
The rise of crypto has been sudden, swift and practically meteoric. Although there are a few factors that have caused this, there’s one that’s to blame in particular.
“The primary reason for this is obvious – Bitcoin,” Brock suggests. “When people started to notice these A1 returns, they saw an opportunity to join the hunt and purchase crypto. If people are in it for the long-term, they don’t really need the skills to monitor the market, and so, patience is the only factor limiting investor success.”
Angus also sees global events like the COVID-19 pandemic affecting crypto’s most recent eruption.
“Due to stimulus packages around the globe in the wake of COVID-19, there are people willing to ‘gamble’ a portion of this money, hence sending the price of these assets up. There are a lot of people looking for alternative investment opportunities and the ability to make quick and large returns,” he says.
“Digital gold like Bitcoin also provides another vehicle for people to place their money into, amidst worry about inflation and the value of money.”
Despite its growing popularity, both Brock and Angus note that crypto might not be for everyone.
“I’d say that cryptocurrency is for people that are more financially literate and have the time to learn and understand how it works,” Angus says. Brock agrees, noting that “different investing strategies require different levels of financial literacy,” with crypto presuming more knowledge due to its volatility and short-term nature.
“However, I would never discourage anyone from learning about cryptocurrency,” Angus notes. “More and more blockchain technology is being brought into our everyday lives, so this kind of knowledge won’t go astray.”
Behind the scenes of a crypto trading competition
Angus and Brock are both currently participating in a cryptocurrency competition, running from 1-14 June. Bond Business School is hosting this contest in partnership with Gold Coast cryptocurrency trade desk TrigonX as an opportunity for students to buy, sell and trade cryptocurrency in a low-risk environment.
The competition will reward its winner with a $15,000 prize, however, that wasn’t the reason that either Angus or Brock got involved – it was much more about furthering their financial education.
“The competition with TrigonX was something that piqued my interest because it was an opportunity to get familiar with trading digital assets, minus any real risk. It’s also been extremely interesting to view new technology and trading platforms,” Angus says.
“I believe that one of the key things that the competition has made me realise about myself is my appetite for risk. Being able to see in real time the consequences of taking risks in a volatile market will be invaluable knowledge in the long run as I navigate and learn more about cryptocurrencies.”
Ultimately, the environment created by the TrigonX cryptocurrency competition is just a taste of what Angus and Brock will experience as they finish their degrees and move into a bustling career landscape. Both are studying the Bachelor of Actuarial Science majoring in Finance, which will set them up to work in crypto should they choose.
“Actuarial science is a very dynamic study area that is always investigating new technology and looking at ways that financial markets are influenced,” Angus says. “My eventual career goal is to go into asset management, so learning about alternative investment opportunities like cryptocurrency will give me a leg up in understanding these assets.”
Brock agrees, and notes that he’s particularly interested in working with crypto in the future. “I would love to go into a job relating to crypto or the stock exchange. This has been a personal hobby of mine so it would be great to translate it into a career,” he says.
“I’ve learnt a lot about crypto from the competition – possibly too much to put into words! I’ve also been enjoying using new skills learned in my Actuarial Science subjects in the crypto market both personally and in the competition.”
Where to next?
With vital skills from participating in a trading competition now under their belts, we asked Angus and Brock where they predict the world of crypto is headed.
“Cryptocurrencies and blockchain have unlimited potential in the future. To see what blockchain in particular can be used for in the future will be interesting – it’s anyone’s guess – but I can only predict they will continue to grow and become more prevalent in society,” Angus says.
“Crypto is new technology, so I still believe there is a lot of room for growth, and hence, opportunities,” Brock agrees. “In the long run I would expect that the volatility of crypto will decrease, however only time will tell.”
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