Retail investors embrace bitcoin to counter low rates

REUTERS
TOKYO-SEOUL
Published 02.06.2017 23:02
Ken Nagahama, Numazuko Ginza sushi restaurant manager, demonstrates the Bitcoin purchase system at his restaurant in central Tokyo.
Ken Nagahama, Numazuko Ginza sushi restaurant manager, demonstrates the Bitcoin purchase system at his restaurant in central Tokyo.

Long the preserve of geeky enthusiasts, bitcoin is going mainstream in Asia, attracting Mrs. Watanabe - the metaphorical Japanese housewife investor - South Korean retirees and thousands of others trying to escape rock-bottom savings rates by investing in the cryptocurrency. Asia's moms and pops, already regular investors in stock and futures markets, have been dazzled by bitcoin's 100 percent surge so far this year. In comparison, the broader Asian stocks benchmark has gained 17 percent over the same period.

Even after a tumble from last week's record $2,779.08 high, bitcoin rose more than 60 percent in May alone, driven higher in part by investors in Japan and South Korea stepping in as China cooled after a central bank crackdown earlier this year.

Over the last two weeks, and encouraged by Japan's recognition of bitcoin as legal tender in April, exchanges say interest has jumped from the two countries. Bitcoin trades at a premium in both due to tough money-laundering rules that make it hard for people to move bitcoin in and out.

"After I first heard about the bitcoin scheme, I was so excited I couldn't sleep. It's like buying a dream," said Mutsuko Higo, a 55-year-old Japanese social insurance and labor consultant who bought around 200,000 yen ($1,800) worth of bitcoin in March to supplement her retirement savings.

"Everyone says we can't rely on Japanese pensions anymore," she said. "This worries me, so I started bitcoins."

Asia has proved fertile ground for bitcoin due to the region's thriving retail investment culture in which swapping investment tips is already common. China, Japan and South Korea are home to several of the world's busiest cryptocurrency exchanges, according to a CoinMarketCap ranking.

"Right now, it's a form of speculation, like stocks," said Park Hyo-jin, a 27-year-old South Korean who owns around 3 million won ($2,700) in bitcoin. "I don't think anybody in South Korea buys bitcoin to use it."

The risks, though, are rising too.

Bitcoin is largely unregulated across Asia, while rules governing bitcoin exchanges can be patchy. In Hong Kong, bitcoin exchanges operate under money service operator licenses, like money changers, while in South Korea they are regulated similar to online shopping malls, trading physical goods. Often, there are no rules on investor protection.

Park and Higo were drawn into bitcoin by friends. Others are attracted through seminars, social media groups and blogs penned by amateur investors. Noboru Hanaki, a 27-year-old Japanese web marketer and bitcoin investor, said his personal finance blog gets around 30,000 page views each month. The most popular post is an explanation of bitcoin, he said, noting that when the bitcoin price surged last month, readership of the article doubled.

Rachel Poole, a Hong Kong-based kindergarten teacher, said she read about bitcoin in the press, and bought five bitcoins in March for around HK$40,000 ($5,100) after studying blogs on the topic. She kept four as an investment and has made HK$12,000 tax-free trading the fifth after classes. "I wish I'd done it earlier," she said.

Not everyone's making money.

The bitcoin frenzy has spawned scams, with police in South Korea last month uncovering a $55 million cryptocurrency pyramid scheme that sucked in thousands of homemakers, workers and self-employed businessmen seduced by slick marketing and promises of wealth. Seminars in Tokyo, Seoul and Hong Kong promote similar multi-level marketing schemes that require investors to pay an upfront membership fee of as much as $9,000. Members are encouraged to promote the cryptocurrency and bring in new members in return for some bitcoins and other benefits.

Share on Facebook Share on Twitter