Financial markets this year have been slammed harder than a gastro-ridden Stockhead journo on a recent flight from London to Bangkok. Aussie super funds haven’t escaped the fiscal spear tackle, but Digital Surge believes SMSFs could still find some gains ahead, through its new Earn feature.
The Brisbane-based crypto exchange recently launched Earn to help Aussies garner rewards on their crypto portfolios. And one of the primary objectives for creating the new tool, according to CEO and co-founder Dan Rutter, was to cater to self-managed super funds.
In fact, Rutter is expecting about $50 million to be locked into the new feature from the exchange’s SMSF customers. “Locked” is the wrong word, actually, because unlike many other crypto-staking (passive-income generating) options out there, assets with Earn can be withdrawn at any time. (How’s it going, Celsius?)
And that might prove to be useful if the crypto hopium pipe is snuffed out again and another major lending platform or VC goes the way of a Spinal Tap drummer.
So, bearing in mind all crypto investments, particularly altcoins, are about as risky right now as sampling fugu from an Osaka slum street vendor, what kind of returns are we talking? This tweet gives you the high mark…
With about 13 coins available for no minimum or maximum deposit, Earn currently gives you a range of different APY depending on the token. For instance 1-4% on Algorand (ALGO), and 4-6% on Cardano (ADA), up to as much as 12% on Polkadot (DOT) and 14% through layer 2 Polygon (MATIC), and yep – even 23% with decentralised lending platform Kava (KAVA).
“Safer” assets Bitcoin (BTC) and Ethereum (ETH) aren’t in the Earn mix at the moment, but the exchange is planning to expand on the list soon. We recently caught up with Rutter to find out a bit more…
Keeping it liquid
Hi Dan. Tell us your quick rationale for launching the Earn staking program at this time
Sure. We grew 1,000% last year, so I’m confident the introduction of Earn only strengthens our offerings to SMSF customers – and that’s because it’s more secure compared with other options that have been pretty prominent in the space.
Why do you think it’s more secure or safer compared with other staking programs?
All coins we’ve listed in our Earn product generate yield through native on-chain staking, which means that the asset is always held as the original asset – and are not at risk of any liquidation event. And as the assets aren’t locked up, you can always withdraw and sell at any time in the event of price fluctuations.
So to be clear, this is a totally different approach from the yield-generating tactics of the likes of various embattled CeFi lenders, then?
Yep. Programs that offer higher interest rates than native staking do so by implementing high-risk trading strategies which can fail when the market conditions change quickly – which is what has happened with Celsius. Any exchanges who utilise these programs through services such as Celsius to generate yield could also be susceptible.
Why would SMSF crypto investors use Earn when they can just take self-custody of their digital assets and stake via native protocols, such as Polkadot, Solana or Cardano?
Yeah, SMSF investors can take self-custody and stake their coins. But the benefit of Digital Surge Earn is that we make this process simple, and balances can be maintained and reported on within the user’s portfolio. End of year compliance is simplified by synchronising your Digital Surge transactions with your SMSF advisor without the need to export transaction data from multiple systems.
Crypto SMSFs – this is the way?
Most super funds have taken a hefty gut punch over the past 12 months. Do you think SMSFs with some crypto exposure can buck the trend somewhat, even through an extended bear market?
This was evident in the previous crypto bear market, when crypto based SMSFs outperformed retail SMSFs over the long term. As always it’s recommended to do your own research and diversify your portfolio. Choose your investment strategy and diversification breakdown and stick to it.
Do you have an estimate on the amount that SMSFs might be diverting into crypto?
So from the strong uptake we’ve already seen, we’re expecting the average Aussie SMSF to have $100,000 invested in crypto, up from the average of $40,000 currently invested in digital currencies.
And we’ve seen a 25x jump in SMSF accounts join our platform since we launched this aspect of business and anticipate another double digit jump with the introduction of Earn.
Not concerned about the reputational damage crypto has suffered with the “contagion” of collapsing, over-leveraged companies?
There’s no denying recent sentiment has certainly slowed down crypto activity while the public catches its breath. During the boom there were a lot of businesses spending a lot of money and overextending themselves. But once the dust settles, I think the industry will be in a more stable position. In the meantime, we’ll continue to work with SMSF investors to help simplify crypto and build long-term value.
Digital Surge has been flying under my radar a bit… can you tell us where you think it sits in the Aussie crypto-exchange market at present and perhaps what makes it different?
We’re now in our sixth year of operation, and we’ve built our platform to be very easy to use while providing our users selection and value for money. Customer service and ease of use are what we are known for by our customers, and we also won the Finder award for the Best Exchange for Value for 2022.
By focusing on compliance and data reporting for SMSFs we’ve continued to build our SMSF client base by simplifying the end-of-year compliance process that is necessary for SMSFs.
When will the market pain end? When? Wen?
Got any predictions regarding this bear market? When do you think things could potentially flip bullish again?
Every bear cycle is different, however, if you compare them since 2013 they do appear to be getting shorter. Once the sentiment of news starts to be less negative there will be a shift which will allow investors to build confidence. Two things that will impact crypto is the possible impending global recession, as well as regulation which will see more institutional money coming into the industry.
And any other thoughts about where you see crypto going? Any particular narratives/themes you’re bullish on?
If you look at the previous bull runs, they’ve been different every time. In 2017, the Bitcoin run was followed shortly by Alt season. The 2021 bull run was over a longer period of time and we saw the Bitcoin run, Alt season, then DeFi season, and then followed by NFTs. While future bull runs may look similar, I just think it’ll be smart to look out for the next DeFi or NFT trend to get involved with early.
This interview was edited lightly for clarity, and believe it or not, wasn’t a sponsored article.
At the time of writing, this recently relocated journalist holds various digital assets, including Bitcoin, Ethereum, Polkadot and way too many NFT jpegs than is probably sensible. He also has a small SMSF allocation in BTC and ETH, but not with Earn at this point.