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Local crypto players bullish after Bitcoin hits $11K

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 24 Jun 2019
Bitcoin volatility won’t disappear any time soon.
Bitcoin volatility won’t disappear any time soon.

Local players in the South African crypto-currency market believe the latest rally Bitcoin is experiencing will continue, even smashing the $20 000 high of 2017.

This after Bitcoin, the world’s most popular digital currency, soared to over $11 000 to set a new high for 2019.

On 23 June, the world’s largest crypto-currency by market capitalisation shot upwards to a new high of $11 215, the highest level Bitcoin reached since 5 March 2018. The digital currency is now up over 170% this year.

However, at the time of publishing, Bitcoin had dropped to $10 785.

Price fluctuations have been a major issue in Bitcoin’s history. Its peak was $20 000 in December 2017. However, the price plummeted to a low of $3 200 in December 2018 and since then, the price has been steadily climbing.

According to Coindesk, Bitcoin’s 2019 bull-run started off with a bang in recent weeks, likely a combination of traders buying into their own fear-of-missing-out, as well as institutions chasing the tail-end announcement of Facebook’s project Libra.

Last week Tuesday, the social media doyen shared plans for Calibra, a newly formed Facebook subsidiary, whose goal is to provide financial services that will let people access and participate in the Libra network.

The first product Calibra will introduce is a digital wallet for Libra, a new global currency powered by blockchain technology.

Financial sovereignty

Commenting on the recent surge, Farzam Ehsani, VALR CEO and co-founder, says the fundamentals of Bitcoin have not changed.

He notes this is the first digital asset humanity has ever had that can be sent peer-to-peer without going through any financial intermediary.

Bitcoin price since 2009 to 2019. (Source: BitcoinWiki)
Bitcoin price since 2009 to 2019. (Source: BitcoinWiki)

“It gives the option of financial sovereignty in a digital age where all digital assets, apart from crypto-currencies, require the need to trust third-party intermediaries. In a world where the commodity of ‘trust’ is being degraded, crypto-currencies can play a significant role in giving more control over one’s own financial assets.”

According to Ehsani, while it’s always difficult to predict price movements, there is every indication this rally has just begun.

“Volatility won’t disappear any time soon – this is an inherent characteristic of a new and independent asset class whose value is determined by the brute market forces of supply and demand. And when opinions of this asset class differ so widely, this is manifested in volatility of the asset class,” he says.

On whether Bitcoin will reach the $20 000 high of December 2017, Ehsani says that mark will be surpassed by a long shot.

“The value of all Bitcoins today stands at $190 billion. This is a drop in the ocean compared to other asset classes. If Bitcoin’s total value were to hit parity with the total value of gold, we would see each Bitcoin valued at $465 000. This may seem extreme, but so was the thought of Bitcoin being at parity with the US dollar only eight years ago, and that now is a distant memory,” he says.

Ehsani says Bitcoin remains predominantly a speculative asset in SA at the moment. Its adoption as a means of exchange is surely increasing but this will still take quite some time to develop, he notes.

Expected resistance

Richard de Sousa, senior partner at AltCoinTrader, reiterates that the fundamentals for Bitcoin have been in place.

“Compared to 2017, we have got a lot better infrastructure. The onramp for fiat coming into the crypto is much stronger; there are a lot more nodes and miners on the network; and a lot more players in the industry, which means this rally will be much more sustainable than it was in 2017. A lot of institutions are also buying into Bitcoin.”

On hitting the December 2020 rally, De Sousa says: “Historically, we have seen there is not a lot of resistance between the $10 000 and $20 000 mark. Bitcoin is currently smashing all expected resistance via the technical charts. So we can probably say the rally will continue and Bitcoin will continue to rise. The altcoins are also suffering at this stage as Bitcoin is strong.

“In my opinion, Bitcoin will far surpass the $20 000 highs we saw in 2017. I think that will be a milestone that it is going to blow through possibly still in 2019. It is realistic and probable to see Bitcoin breaking all-time highs in 2019 and certainly in 2020.”

Speculative period

Marius Reitz, Luno’s general manager for Africa, says there has been a lot of pent-up interest and capital from both consumers and institutional investors who want to make sure they don’t miss the next wave as the asset class appreciates in line with its long-term upward trend.

He notes that at the moment, any buying of Bitcoin tends to lead to a period of speculation, which is the ongoing theme for the currency.

Reitz notes Luno doesn’t take a position on the price of Bitcoin but “I believe that the asset class will continue to appreciate in line with its long-term upward trend. We’ve been through more than 10 price rallies and pullbacks over the years but Bitcoin always ends up in a stronger position over time.

“We believe that network effects often drive exponential growth: the more people who have access to something (like e-mail, a Facebook account or Bitcoin), the more valuable it becomes.”