SA crypto players upbeat as Bitcoin nears $20K milestone
Leading crypto-currency exchanges in South Africa believe the price of Bitcoin will breach the $20 000 (R307 000) all-time high it reached during the tail-end of 2017.
This as the world’s most popular crypto-currency has of late been surging in value and inching closer to $20 000.
At the time of writing, Bitcoin was trading at $18 000 (R277 000), from a low of about $4 000 earlier this year. In December 2017, Bitcoin climbed to a record high of $20 000 before it started losing value.
Richard de Sousa, CEO of local crypto exchange AltCoinTrader, says due to Bitcoin’s asymmetrical upside – the ability to increase dramatically and not so much the ability to fall and crash – it seems highly unlikely the price will dramatically crash during the initial phase of the bull run.
“I think a $20 000 high like we saw in 2017 is a modest milestone for Bitcoin. We can expect Bitcoin prices to possibly double that in the next 18 months, or even sooner, because of the fact that institutional investors are buying up all the Bitcoin and this has even had a more dramatic effect as Bitcoin scarcity is coming into play,” says De Sousa.
“The price of Bitcoin is going up dramatically because not only are institutional investors buying Bitcoin and putting it on the companies’ balance sheets, but they are buying it at a rate that is exceeding the miners’ ability to produce Bitcoin, which is making Bitcoin extremely scarce.”
He adds another factor that should be considered is that PayPal, with its 346 million users, has announced people can buy, sell and trade Bitcoin on its platform.
According to De Sousa, this was initially rolled out in North America, and will soon be rolled out to the rest of the world.
“This has made Bitcoin available to the man on the street. In addition to that, PayPal has 26 million merchants which will be accepting Bitcoin and this will allow everyone to simply pay for goods in Bitcoin.”
Increasing institutional interest
Marius Reitz, Luno GM for Africa, notes PayPal revealed in October that it will open for buying and selling of crypto-currencies, and there are already some signs of PayPal’s entrance in the crypto market.
He points out that while only 10% of PayPal customers in the US had access to the crypto service initially, the company opened up for all US customers last week.
“There’s also been substantial and increasing institutional interest in Bitcoin which is driving up the price,” Reitz says.
He points out that Grayscale Investments, the largest US Bitcoin investment trust, reported a record quarter, with an inflow of almost $1 billion (the largest inflow of funds during a single quarter recorded in October) − 81% of investments came from institutional investors.
Microstrategy, a Nasdaq-listed software firm worth over $1.2 billion, has effectively invested all $250 million of its planned inflation-hedging funds into Bitcoin, he adds.
“Well-known American hedge fund manager Paul Tudor Jones is bullish on Bitcoin. He declared the crypto-currency the best hedge against inflation and compares investing in Bitcoin now to investing in early tech stocks, like Apple and Google.
“We’ve seen a lot less hype (in the media, friends and family asking) and excessive speculation compared to 2017. The Bitcoin price is almost back to its previous high with very little noise – it’s a sign that it’s perhaps driven by institutional demand versus retail speculators.”
However, he cautions: “We’ve seen many rallies and pullbacks in the past and it would not be surprising if the Bitcoin price retraced back to lower levels again in future. However, we cannot speculate whether the price will reach previous lows.
“We don’t know what the price will do in the short term, but the market is in a strong upward movement. It has been in an upward trend since April and with the current price only 10% short of the previous high, it seems like it will come very close. The market will remain volatile, and can go up or down in the short term.”
Comparing Bitcoin and gold
According to Farzam Ehsani, CEO and co-founder of VALR, the price of Bitcoin has been on a significant upward trend over the last month, increasing 42% in the last month and over 6% in the last 24 hours.
Says Ehsani: “No doubt in my mind that Bitcoin will breach its previous all-time-high of $20 000 – the only question I have is when. Let’s put it this way, all Bitcoins in existence are currently valued at just over $300 billion and all gold is valued at over $10 trillion. And in my view Bitcoin has many elements that beat gold as a store of value.
“So, is Bitcoin going to languish around $300 billion forever, or will it start marching much higher once more and more individuals and institutions start to recognise its unique characteristics as a store of value? My bet is on the latter.”
He explains that Bitcoin is effectively a hedge against the current financial system. “With central banks in territories they’ve never seen before and the very notion of modern monetary policy in jeopardy with central banks printing trillions of dollars, many people and institutions are now realising the dollar itself may soon be in peril.”
Ehsani notes publicly listed companies, in recent months, have bought hundreds of millions of dollars’ worth of Bitcoin to hold on balance sheet as treasury reserve assets – having obtained board approval to do so – and this trend will only increase.
As demand for Bitcoin surges, he says, the supply of Bitcoin will remain steady and the increased demand can only express itself in a higher price.
“To be sure, there will still be a lot of volatility. But the overall trajectory of Bitcoin is up and to the right.”
Meanwhile, Eugéne Etsebeth, iCE3X COO, says the exchange is experiencing an increase in trading volumes, user registration, and demand for its crypto debit card by about 100%.
He believes the $20 000 mark will more than likely be breached in the next year, and there is a chance it may even happen before Christmas.