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SA crypto exchanges ride on Ethereum’s all-time highs

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South African crypto-currency exchanges are witnessing explosive growth in Ethereum trades.

This, after the price of Ethereum, the world’s second most popular crypto-currency, this week shot above the $4 000 mark for the first time.

Last week, Nigel Green, chief executive and founder of deVere Group, made a bullish prediction that the Ethereum price was likely to hit $5 000 as the crypto-currency reaches new all-time highs.

According to Finder’s latest Crypto-currency Predictions Report, Ethereum is set to hit $4 512 this year and $19 842 in 2025.

It says Ethereum’s price will be supported by increased transaction use, the rise of decentralised finance (DeFi) and non-fungible tokens and higher adoption rates by institutional investors.

Some 51% of Finder’s panel say Ethereum, not Bitcoin, will be the most widely transacted digital currency by the end of 2022.

Lecturer and assistant professor at the University College of Dublin, Dr Paul Ennis, thinks Ethereum will be worth $10 000 by the end of the year, noting the currency is highly undervalued and has far more use cases than Bitcoin.

At the time of writing, Ethereum was trading at $4 320 (R60 400).

Gaining momentum

In SA, Richard de Sousa, CEO of crypto exchange AltCoinTrader, says: “We are absolutely experiencing explosive growth in the volumes and interest in Ethereum on our exchange and this seems to be just gaining momentum.

“It is something that we have seen in the past but there is really a change in the way that people are viewing Ethereum.”

Likewise, Marius Reitz, Luno GM for Africa, says the price on the Luno platform has risen over 80% in April. Although the volume of Bitcoin traded in SA reduced by 2% from March to April, that of Ether increased by 35% month-on-month, he notes.

“Luno has seen a 44% increase in new Ethereum wallets in South Africa over the past month and volumes are 35% higher. Globally, new Ethereum wallets on Luno have risen 62%, with global volumes up 43%,” notes Reitz.

Farzam Ehsani, co-founder and CEO of VALR, concurs, saying the local crypto exchange has seen a phenomenal increase in interest and trading in Ethereum over the past year.

“In one year, the price of Ether has skyrocketed over 1 400% and volumes on VALR have increased over 100 times,” Ehsani says.

According to De Sousa, the many applications and the amount of developers that are working on the platform are driving the value of Ethereum.

“Ethereum is not just a simple store of value like Bitcoin but it’s a useful currency. You can do so many things with Ethereum – you lend, you borrow. It replaces a lot of traditional financial products,” he says.

“We have seen, in the last couple of years, billions of dollars in value locked on the Ethereum blockchain because Ethereum allows you to make different tokens. So it’s not only the value of Ethereum but it’s the value of all the underlying tokens that are based on the Ethereum platform, and this currency, even though it is experiencing scaling problems, it is set to increase dramatically over the short- to medium-term.”

De Sousa points out there are a lot of competitors to the Ethereum blockchain but as yet, none of them have fully working products.

“There is a lot of promise in this field and we will only see when they have fully working products. I am talking about coins like Polkadot and Cardano, which are very interesting projects but not fully launched yet.”

According to De Sousa, traders have come to see Ethereum not only as an investment but also as a mechanism to earn passive and recurring income.

DeFi power

For Reitz, the Ether market cap relative to the Bitcoin market cap is now at its highest levels since 2018, with the ETH market cap currently sitting at 44.6% of the size of the Bitcoin market cap.

He explains that similar to Bitcoin, Ethereum is used for investment and speculation. Institutional interest in Ethereum has followed a surge of interest in Bitcoin this year, Reitz says.

“The major differentiator is that Ethereum powers DeFi, which allows utilising financial services like borrowing and lending without going through banking institutions or central banks. In traditional banking, borrowers have to put down collateral, but in DeFi, they are able to put down Ethereum as collateral, resulting in an increased demand for Ether.”

Ehsani adds that many projects that promise to redefine finance are being built on Ethereum but “we are also seeing many other coins and blockchains experience explosive growth recently.

“It is becoming more and more apparent that our traditional financial system was built for a bygone age and that crypto-currencies have the potential to revolutionise how our financial systems work.

“At VALR, some of our customers buy Ether to hold for the long-term, others buy it to engage in the decentralised finance space, and others still are buying a little to understand what it looks and feels like to engage in a financial system that is being built by the people for the people.”

Altcoin surge

Meanwhile, Wiehann Olivier, partner and digital assets lead at Mazars in SA, comments there has been an overall increase in the value of altcoins such as Ether, which is attributable to investors becoming more comfortable with blockchain technology and crypto-currencies that allow them to venture away from Bitcoin to try their hand at other possible digital asset investments that might yield higher returns.

“One does, however, need to keep in mind that these higher returns are as a result of higher volatility and, therefore, bring higher risk and rewards,” Olivier warns.

He explains that Ether’s significant appreciation in value is a result of many factors, but the single largest contributing factor is the demand for the digital assets as a result of its use on the Ethereum and Ethereum 2.0 network.

“Ethereum introduced certain technical standards that allow the incorporation of stable coins, non-fungible tokens and smart contracts that are used as the basis for various initiatives, including DeFi, which is expected to revolutionise the financial sector and the concept of lending and borrowing.

“Ethereum is also currently in the process of moving over from Ethereum to Ethereum 2.0, and one of the significant changes is to do away with the proof-of-work consensus algorithm and move to proof-of-stake which allows the Ethereum to scale more efficiently.”

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