According to reports, one in five Australians owns a form of cryptocurrency, making them one of the countries with the highest crypto adoption rates. Australia’s openness to cryptocurrency has 2.9 million people trading on their phones and banks opening up to the digital currency.

Despite the warm welcome people give to the Australian cryptocurrency market, many are still sceptical of investing in digital assets.

What prevents them from becoming crypto investors? This article aims to uncover that and more.

1. Perceived Inadequate Record of Performance

Cryptocurrency and other digital assets are relatively new developments in finance. This puts it at a disadvantage when placed against big-name companies that encounter the financial indexes.

A stock’s performance record is a stock’s history of returns and losses. Analysing this helps investors and investment managers to infer a potential investment’s future performance. People like investing in well-established companies because they have long and proven performance records.

It makes risk analyses easier, future possible computations smoother, and investments more profitable.

Since digital currencies only found their place in more recent years, their track record is still quite short for some investors who are more risk-averse - however, for those with lower risk-aversion, they can reflect on a decades worth of data now. 

Also, an asymmetry of understanding, makes investors more nervous about interacting with cryptocurrency, since a lack of understanding leads to low certainty.

A lot of people are also unaware of the potential.

"A confused mind is reluctant to buy"

Cryptocurrency Volatility

There are many reasons why digital currency prices erratically move, but all stem from the currency’s newness.

As a currency that many people are still unfamiliar with, they are cautious in dealing with it, so much that a bit of news can move charts in different directions.

This highly event-driven and fear-driven price volatility puts Australian cryptocurrencies at a disadvantage yet again.

Volatility is the movement of stock prices based on market conditions.

Price fluctuations are inevitable in any market. However, investors prefer a moderately paced market that allows them to make careful assessments and feel more confident about their speculations.

Since bad news and influencers easily sway investors to buy or sell their digital currencies, crypto’s volatility is wilder.

This roller-coaster-like price action makes investors believe that crypto is a riskier form of investment.

Some are not comfortable with cryptocurrency’s risk. That is why they would also opt to pass up the currency’s enormous potential returns.

On another note, as more people begin holding various cryptos, inevitably, said cryptos become less volatile due to less concentration of holders, which means 'whales' trying to manipulate the markets becomes less impactful over time. 

There's a joke in the cryptosphere that goes like this:

"You only get a loss when you sell - so don't have paper hands, have diamond hands!"

Cryptocurrency Taxation Laws

Every asset has its equivalent tax obligation. However, the newness of digital assets places them at a disadvantage against conventional assets in this aspect as well.

Some people stay away from cryptocurrencies because they do not know how to file them in their taxes.

Australia has clear-cut laws on how people are to file dividends in their taxes. The law is also crystal clear on tax obligations, including obtaining, owning, and disposing of shares.

Investors feel more confident dealing with traditional assets because they know how and where to file them, keeping them safe from potential tax-related issues.

Most people have little knowledge about cryptocurrencies and tax obligations. The lack of information has some investors concerned about the possible implication of tax filing mistakes. It is important to note that tax rules for digital assets already exist, but most people are still unaware of them.

Conclusion

Australia’s cryptocurrency market is strong and ever-growing.

Despite the newness of digital assets, more and more people are investing in them to diversify their investment portfolios and earn generous returns.

However, despite the increasing popularity of these digital currencies, most conventional stock investors are hesitant to take part in the market.

Cryptocurrency’s newness, short performance record, volatile price action, and unclear tax obligations can have people shying away from its magnificent profitability.

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