In early 2017, Hong Qi Yu had just become a coder in the financial industry. This was when he heard about the Ethereum blockchain being discussed as the next big thing – ushering in the next generation of web technologies.
As a coder in the financial advisory space, this piqued his interest. Qi Yu (or as friends call him QY) then bought his first batch of Ether to learn to code smart contracts on it. Needless to say, he found it a very good experience.
Two things happened simultaneously. He thought that this was going to be a breakthrough innovation. Secondly, he also saw his Ether value rise nearly 100% within the span of a few weeks.
While he hadn’t bought Ether for investing or trading purposes, he couldn’t ignore it. As an FX trader himself, he had to spend many long hours monitoring the markets and even then, he had taken nearly a year to double his principal. With cryptocurrencies, he couldn’t help but wonder “what is going on?”.
As it turned out 2017 was one of the best years for cryptocurrencies. This was how QY went down the rabbit-hole that eventually led to him starting his own digital currencies exchange – Tokenize Xchange.
Why He Needed To Start His Own Cryptocurrency Exchange – Tokenize Xchange
It was also around this time that many other cryptocurrencies were being formulated, and the cryptocurrency world itself was also gaining more mainstream attention. Learning about new up and coming crypto projects, he “started putting serious money into different projects. On average, they made about 5 times returns. The good once could make 20x or 30x returns.”
Besides tasting early success on his trades, QY was quickly burning out in his coding day job. Working at a small fintech firm, his team of 3 coders were working at breakneck speeds and with extremely tight deadlines. It was not sustainable for him, especially since he was also very passionate about his new interest in cryptocurrencies. He decided that he could carve a career in the crypto world.
As QY puts in, “it would be easier to just be a cryptocurrency trader”. However, he felt there was great barriers in the cryptocurrency ecosystem for both new and also experienced traders. For example, when he tried to “put $100,000 into cryptos, it was so difficult. And it would take months to enter. And I just thought why does it have to be this way”.
“Another problem was when I want to buy Bitcoin. After reading my charts, I wanted to buy at $3,000 for example. I had to literally wait 8 hours just to do that. There wasn’t a limit order, so I just had to wait for that price and click the BUY button. I thought this was a nightmare”.
With his background as a coder, QY thought he “could definitely deliver a better experience” for trades and investors in Singapore.
Raising US$12 Million To Launch Tokenize Xchange
In late 2017, QY began working on a crypto exchange. “In 3 months, in early January 2018, we rolled out our first beta website with our first 100 users”. At this point, there were only 2 digital currencies available – Bitcoin and Ether.
QY says he was only able to because he was working with great partners. In addition to Tokenize Xchange’s pioneering team that funded the company, QY had “friends who were Angel Investors within the payment gateway sector. They put in the first $100,000 we raised to push through the first 3 months.”
“Within another 3 months, we grew to a 1,000 users. And in another 3 months, we launched our own coin and raised US$12 million fund raising in Ether.” This set Tokenize Xchange on the expansion path. “Today, we are in Malaysia, Thailand, Indonesia, and Vietnam.” In majority of its markets, Tokenize Xchange either has a licence or is part of a shortlist of firms awaiting their relevant licences.
By the end of its first year, Tokenize Xchange had more than 40 coins listed on its platform.
Paying Equal Attention To Its Customer Service And Security
QY didn’t just have a vision to start a crypto exchange, he also had the skills. His trading background was also instrumental to designing how a crypto exchange should look like for users.
In our chat, he shared that he was part of the first engineering team to code features into the platform. One of his pet features (which I believe is because of his experience waiting 8 hours for his early trade into Bitcoin) was the Order Book feature.
Besides its crypto exchange, Tokenize Xchange was also rapidly growing his operational capabilities. QY travelled to Vietnam to start building his engineering team. Now, the region has become a key cog in Tokenize Xchange’s engineering solutions. This has set it apart within its markets – enabling local currency purchases.
Tokenize Xchange was also one of the first platforms to offer Order Book Exchange. “So, most of the platforms work like a money changer – there is a buying price and a selling price. You can’t queue at the price that you want”. Tokenize Xchange allows its investors and traders to queue their orders to execute.
Another aspect of its success is that QY takes great pride to ensuring high levels of security and compliance. As part of its KYC process from day 1, “when users onboard with us, they need to upload banking accounts or stockbroking accounts, with passport and proof of address as a minimum standard”.
This limited its user growth, but it played a key role in getting licences and adding to its credibility.
Riding The Ups And Downs Of Starting A Crypto Business
Many of us would recognise that cryptocurrencies are hugely volatile. For example, Bitcoin has risen more than 75% from US$38,000 to a high of US$68,000, then crashed about 70% from there to about US$23,000 today. Other cryptocurrencies have simply gone bust (such as the recent Luna saga).
Similarly, crypto businesses have to ride the ups and down of the industry they operate in. While there have been many positive milestones for QY and Tokenize Xchange, QY says that the lowest points are what he remembers.
He shared that in the infancy of the business, Tokenize Xchange only had about a one-month runway for its cashflow despite only having 4 employees at the time. “We were running out of cash. While we were very confident of funding from our ICO (Initial Coin Offering) coming in very soon, we had to be transparent that we were not able to make payroll on time in one of the following month. We informed all the employees, and unfortunately our first employee was in a bad financial situation, and had to leave us in the first 3 months.”
“Our ICO did go through the following month, and we secured the US$12 million”. That was when QY went on a hiring spree to grow the business and expand its regional presence.
Another story QY shared was that at the end of 2018, cryptocurrency markets took a dive. “When we started, Bitcoin was US$20,000 and by the end it was near US$3,000.” The euphoria from their ICO and hiring spree had all but vanished. Tokenize Xchange’s revenue had dipped 90% from its first year. In order to sustain itself, QY said that they had to take the painful decision to downsize now.
It was not just Tokenize Xchange reeling from the hurt. QY mentions that he saw many individuals who came into the crypto space in 2017 and 2018, leaving in early 2019. “We saw one of the biggest Over-the-Counter trading firms, which had several hundred million in revenue the previous year, closing shop in 2019”. “The crypto space looked like a devastated world, and even our employees were questioning if the crypto industry could survive”.
Then came COVID-19. “We were in survival mode.” QY sighed “Really don’t know what to do”. In a stroke of luck, QY sponsored a virtual summit. Many investors and traders came to know Tokenize Xchange through that summit – which helped it ride the market upturn just less than a year later.
“Little did we know, Bitcoin would recover to US$20,000. Shortly after, it rocketed to over US$65,000”.
Crypto Still The Way To Go
QY admits that because he built his business in the space, he sees it as the way to go. He was just 27 when he started Tokenize Xchange, and the crypto space has allowed him to build his networth to what it is today – something he would not have achieved just working or even trading.
He has also seen many ups and downs in just a few short years. QY joked that he “now suffers from PTSD because of it”.
He also agrees that unlike when he started out, he is not 100% into cryptocurrencies. Today, he has over 70% of his networth in cryptocurrencies. He keeps 20% in cash – which QY says is likely to be deployed in cryptocurrencies or Chinese equities whenever a good opportunity comes up. The remaining small proportion of his wealth is in equities.
Before we parted ways, QY shared some advice for new or beginner crypto investors as he understands the pains of ordinary investors. His first foray into investing saw him lose six months’ worth of his savings in the stock market.
With that, he shared that “we must always think about the long term, and not be lured by the short-term”. Personally, this feels like a reference to the very high interest rates being offered by Luna before it crashed.
He also thinks investors should “limit their investment exposure to cryptocurrencies and distribute their investments to more platforms to avoid single counterparty risk can be a solution too”.
Finally, he also said that newer investors can afford to take a little more risk with a small proportion of their portfolio.
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