We could be stumbling into a digital welfare dystopia, says Open Secrets

Written by Ciaran Ryan. Posted in Journalism

With the commercialisation of personal data of millions of social grant recipients. From Moneyweb.

The Covid-19 social relief grant WhatsApp platform set up for free presented an opportunity for a company to build a database of about half the country’s population. Image: Bloomberg
The Covid-19 social relief grant WhatsApp platform set up for free presented an opportunity for a company to build a database of about half the country’s population. Image: Bloomberg

Who would have thought the Covid-19 pandemic would present a potential gold mine for companies specialising in the harvesting and selling of data?

Apple’s market cap, now $2.6 trillion, is up 136% since the onset of Covid. If it were a country, Apple would be the eighth largest in the world, just after France and India, with GDPs of $2.8 trillion and $2.7 trillion respectively.

Microsoft’s market cap, at $2.5 trillion, is up 116% since the onset of Covid. Google’s holding company Alphabet’s market cap is $1.9 trillion, up 138% over the same period. Facebook’s market capitalisation is up 135% to $853 billion since the Covid crash of March 2020, and is now the world’s seventh most valuable company.

Data is the ‘new oil’ and books like Life After Google by George Gilder and The Age of Surveillance Capitalism by Shoshana Zuboff explain how these tech companies have become the richest companies in the world by harvesting our personal data and selling it to advertisers and others.

Social grants as a profit opportunity

A new report by research organisation Open Secrets called ‘Digital Profiteers – Who profits from social grants?’ explains how the Covid pandemic created yet new opportunities for profit by tech companies as people migrated to an online world for shopping, information and health care services.

It’s not as if South Africans haven’t been exposed to the uglier side of data harvesting before.

In 2012, the SA Social Security Agency (Sassa) contracted with Cash Paymaster Services (CPS) to handle social welfare payments. Under the banner of ‘financial inclusion’, CPS embarked on a massive enrolment drive, collecting data on 17 million beneficiaries and opening bank accounts for 10 million grant recipients.

CPS’s parent company Net 1 UEPS Technologies had unrestricted access to this database and used its subsidiaries to sell financial products to grant recipients.

It made more money from selling financial products than from distributing grants.

The Constitutional Court found the Sassa contract unlawful and ordered CPS to repay unlawful profits reckoned to be more than R500 million.

Read:Net1 accused of overstating financial losses in Sassa fee negotiation

CPS has still not revealed how much profit it made from social grants contract

In April 2021, the ConCourt ordered CPS, which has been fighting the case, to open its books to independent scrutiny to determine how much it must pay back.

Here we go again?

Which brings us back to the latest campaign to sign up millions of South Africans for Covid grant relief, which started in April 2020.

It was at this point that Open Secrets started to question the digitalisation of the welfare state. Its latest report focuses on GovChat, a relatively small SA tech company, though Sassa’s most visible partner in its digitalisation drive.

In early 2020, GovChat offered its services for free to set up a WhatsApp platform for the Covid-19 Social Relief of Distress (SRD) grant application process.

An SRD grant was made available to alleviate poverty and unemployment, and was awarded to seven million people from 12 million applicants between April 2020 and April 2021. The grant was reinstated in August 2021, and this time was awarded to eight million people from 13 million applicants.

‘Inadequate scrutiny’

“Globally, there has been inadequate scrutiny of how companies are profiting from their access to personal data gathered through government contracts under the auspices of providing public services,” says Open Secrets.

Though no claim of wrongdoing on the part of GovChat is made, Open Secrets says a fully automated grant application process presents an extraordinary opportunity to build a database of about half the country’s population, if one considers the existing 18 million grants paid by Sassa to 11 million beneficiaries, plus the 13 million applicants for SRD grants.

“The plan to digitise has opened up the possibility that this data will be available to a variety of public and private actors.

“Access to the data of more than 30 million people would constitute the kind of big ‘data play’ that financial and technology firms dream of,” says Open Secrets.

Moneyweb asked report author Michael Marchant whether GovChat, which Open Secrets admits has not been found guilty of any wrongdoing, is being ‘pre-crimed’, as in the film Minority Report where the police use clairvoyants to detect crimes before they happen.

‘Potential for abuse’

“It’s a valid question, but I think it is equally valid to draw attention to the potential for abuse and hopefully get some discussion going around ownership of our private data, which is protected under the Protection of Personal Information Act [Popia], who gathers this information and how it is monetised.”

Open Secrets says GovChat may have provided its services to Sassa for free in a time of need, but that puts it in an ideal position to benefit from future contracts linked to the distribution of social assistance.

It says “it is apparent that GovChat has been granted a significant advantage without the normal legal requirement of a competitive procurement process, and the public scrutiny that such a process provides”.

‘Innuendo and the inferences’

Perhaps understandably, GovChat has taken offence to the association with Net 1 and CPS.

Eldrid Jordaan, CEO of Govchat.org, responds that any party that engages with government should be subject to reasonable level of scrutiny and should conduct itself in accordance with all appropriate laws and regulations.

“Our objection was not to the scrutiny, [as] we have nothing to hide and the Open Secrets report and their reporters have admitted that they have found no impropriety at GovChat.

“Our objection lies in the innuendo and the inferences the report makes by reference to Net 1 and CPS, entities and organisations that have been judicially determined to have acted inappropriately.”

Threads of connection

GovChat received R20 million in equity funding for a 35% share from JSE-listed fintech Capital Appreciation (Capprec), which in turn counts African Rainbow Capital among its shareholders.

Capprec in turn owns three subsidiaries – Synthesis, African Resonance and Dashpay – all of which are focused on selling technological solutions to financial and banking clients.

Another aspect to the case involves the Competition Tribunal, which last month extended a March order interdicting Facebook (owner of WhatsApp) from kicking GovChat off the messaging app.

Facebook had argued that GovChat was violating its terms of service and was able to aggregate data without checks and balances, giving it an unfair advantage over other business solutions providers.

Read:Facebook data breach: what happened

WhatsApp fined $266m over data transparency breaches

GovChat argued that to off-board it from WhatsApp would materially prejudice its business.

Says Jordaan: “[Regarding] the Competition Tribunal’s decision, it is a decision which extends its prior determination and allows the Competition Commission’s inquiry into WhatsApp’s anti-competitive conduct to be completed. We are hopeful that the Competition Commission will conclude that WhatsApp’s conduct is anti-competitive and refer the matter to the [Competition] Tribunal for full adjudication.”

Open Secrets points out that Facebook has been found to violate users’ privacy and sell their data without consent – the most recent case earning it a R4 billion fine by Irish authorities for violating the EU’s data privacy laws. Facebook’s response to tighter regulatory scrutiny has been to throw money at lawmakers “and push back against more effective regulation,” says the report.

“Given this track record, Facebook’s appetite for contracts with South African government departments and private sector actors to Hoover up more data must be watched closely by regulators and civil society. Open Secrets will certainly be doing so.”

2021 was another year for the crypto record books

Written by Ciaran Ryan. Posted in Journalism

The past year has been all about the rise of the altcoins. From Moneyweb.

Image: Chris Ratcliffe/Bloomberg
Image: Chris Ratcliffe/Bloomberg

2021 was another year for the crypto record books, with the total market cap of the sector surging nearly 300% over the last 12 months.

Bitcoin (BTC) is up an impressive enough 179% over the last year, but this pales alongside the rampage of altcoins such as Solana, Ethereum and Cardano.

Retrospective review of cryptos in 2021 (12-month returns)
Bitcoin (BTC)Store of value179%
Solana (SOL)Smart contract platform10 725%
Binance Coin (BNB)Smart contract/CeFi1 933%
Cardano (ADA)Smart contract platform855%
Ethereum (ETH)Smart contract platform685%
Polkadot (DOT)Smart contract platform479%
Uniswap (UNI)Decentralised exchange/DeFi391%

* DeFi = decentralised finance; CeFi = centralised finance

Source: Revix

The number of cryptocurrencies increased to more than 10 000 as of November, which is double that as of April 2020.

The rise of smart contract-based cryptocurrencies

As can be seen from the table above, when broken down into the different types of crypto assets, smart contract cryptocurrencies did much of the heavy lifting in 2021.

Smart contracts are contracts written into computer code that are self-executing and require no human intervention – for example, the ability to borrow money at roughly 5% a year using cryptocurrencies as collateral. No credit approval is required, nor are you required (in many cases) to disclose your name. A host of other financial applications and transaction types, such as self-executing insurance contracts, have also become available on smart contract networks like Ethereum.

Ethereum was the first crypto network enabled for smart contracts, but others like Solana, Cardano and Polkadot have made impressive strides over the last year in the race for dominance of a market which currently accounts for more than $100 billion in ‘locked-up’ funds.

Binance Coin is the native currency of the Binance Smart Chain, which offers an alternative to Ethereum and other DeFi platforms. It offers users much lower costs than Ethereum, with pretty much all of the same functionality.

Yet, the Binance Smart Chain gives up something for its speed and low costs – decentralisation.

Binance is a private company, whereas Ethereum, Bitcoin and others are decentralised. Binance chooses who qualifies as a ‘validator’ on its blockchain and only uses 21 validators. Founder Changpeng Zhao likened Binance to a ‘CeDeFi’ or centralised DeFi. The Binance coin is also used as a utility token on the Binance trading exchange. This accounts for the extraordinary rise of the BNB coin over the last year.

Stablecoins account for three of the top 20 cryptos

Another theme observed in 2021 was the emergence of stablecoins – backed by currencies and real world assets – as a major force in the crypto space.

Stablecoins account for four out of the top 20 cryptos as measured by market cap. They include USD Tether, with a market cap of $75 billion, USD Coin (USDC) with as market cap of $40 billion, Binance USD ($13.6 billion).

Each of these stablecoins is backed 1:1 by the US dollar or US dollar equivalents. They are used by crypto traders and investors to park profits in more stable assets during periods of crypto volatility.

Institutions jump on board the Bitcoin train

In November 2021, Bitcoin’s most famous corporate backer, Michael Saylor of MicroStrategy, announced that his company had purchased another 7 002 BTC, bringing its total holdings up to 121​​ 044 BTC (worth $6 billion).

Institutional investors precluded from investing directly in BTC can take a punt on MicroStrategy – which is ostensibly an IT firm, but in reality has become a proxy for Bitcoin.

“This is not a speculation, nor a hedge. It is a deliberate corporate strategy to adopt the Bitcoin Standard,” Saylor told Real Vision CEO Raoul Pal in an interview. Saylor has become an evangelist for Bitcoin, and has on numerous occasions pointed out the detriment of holding cash on your balance sheet.

Says Brett Hope Robertson, investment analyst at crypto investment platform Revix: “Institutional adoption is still in its infancy, but it’s not as if fund managers aren’t drooling over BTC’s compound annual returns of about 200% a year. Most are simply precluded from this new asset class in terms of their investor mandates, and by its lack of regulation, which they hope will change in the coming years.”

Some of the world’s largest fund managers have started to nibble at cryptos, including the world’s largest investment house, BlackRock, as well as Morgan Stanley Investment Management and more than a dozen other fund managers.

Blackrock also owns a 14.56% stake in MicroStrategy.

A more common way for institutional investors to gain exposure to Bitcoin is through Grayscale Bitcoin Trust, a publicly-traded instrument backed by investments in Bitcoin. With $35 billion under management, Grayscale allows investors with a minimum of $50 000 to gain exposure to Bitcoin without having to worry about issues such as custody and security.

US regulators have been reluctant to grant approval to exchange-traded funds (ETFs) with a direct exposure to Bitcoin, but in October approved the ProShares Bitcoin Strategy ETF as one of several futures-backed Bitcoin ETFs now either approved or under consideration.

Meanwhile, corporate adoption of Bitcoin continues to grow, led by Saylor, former Twitter CEO Jack Dorsey’s investment company Square, Ross Stevens of Stone Ridge Asset Management, among others. Tesla CEO Elon Musk became something of a Bitcoin supporter during the year, though that’s open to question given his decision to sell a small portion of the Bitcoin acquired by Tesla earlier in the year.

The rise of gaming-focused cryptos

A subset of cryptos that is fast gaining public attention is that of gaming-focused coins like Axie Infinity (AXS), Decentraland (MANA), The Sandbox (SAND), Gala (GALA) and Enjin Coin (ENJ).

“Some of the most exciting projects in the crypto space are happening in the gaming arena,” says Hope Robertson.

“Gamers are being offered ways to interact with fellow players while earning money, and there are some ingenious concepts behind this new crop of cryptocurrencies coming out of this sub-sector.”

A look at the table below shows some startling returns from gaming cryptos over a 12-month period. For example, Axie Infinity is a blockchain-based trading and battling game that is partially owned and operated by its players. Inspired by popular games like Pokémon and Tamagotchi, Axie Infinity allows players to collect, breed, raise, battle and trade token-based creatures known as Axies. It was created in 2018 and has built an astonishing market cap of nearly $7 billion in less than three years.

Decentraland (MANA) is a virtual reality platform powered by the Ethereum blockchain that allows users to create, experience, and monetise content and applications. It allows users to purchase plots of land that they can later navigate, build upon and monetise, and though it only launched in 2017, it has built up a market cap of $6.8 billion. The Decentraland ‘metaverse’ comprises more than 90 000 pieces of land offered up for purchase and development in a virtual world.

All in all it’s been an amazing year for cryptocurrencies, with many new and exciting sectors being built.

Another mystery investor emerges to rescue Africrypt investors at 65c in the rand

Written by Ciaran Ryan. Posted in Journalism

Investors have seven days to accept the offer. From Moneyweb.

The offer was made on Friday, December 3, and applies to investors’ deposited amount, not the current value of their ‘hacked’ crypto. Image: AdobeStock
The offer was made on Friday, December 3, and applies to investors’ deposited amount, not the current value of their ‘hacked’ crypto. Image: AdobeStock

Barely a week after a mystery ‘white knight’ offered creditors $4 million (R64 million) to bail out investors in the failed Africrypt scheme, another mystery investor has appeared with a better offer of $5 million (R80 million), equivalent to 65 cents in the rand.

The first offer made in November was also for $5 million, though only $4 million of that would go to creditors, with the remaining $1 million (R16.13 million) going to the running of the company.

Read:Africrypt creditors vote to accept R77m payout

R77m rescue plan for Africrypt could see Cajee brothers avoid criminal prosecution

This latest offer of $5 million is a simpler offer, with a timeline of seven days for acceptance, after which the ‘white knight’ will purchase and take cession of the claims.

Africrypt collapsed in April after its accounts were supposedly hacked and emptied of all funds. But it turns out this was not the first hack to have plagued the founders of Africrypt – brothers Raees and Ameer Cajee – and their investors.

As Moneyweb reported, a previous investment scheme of theirs was supposedly hacked in May 2019, causing more than a few Africrypt investors to suspect foul play. Two hacks in less than three years seemed a stretch too far for some investors, who suspect the Cajees are now using proxies to make an offer of compromise with the hope of avoiding jail time.

Read: Lightning strikes twice for Africrypt’s Cajee brothers

The latest offer of 65 cents in the rand is on investors’ deposited amount, not the current value of the ‘hacked’ bitcoin or Ethereum.

Investors who deposited into Africrypt in September 2019 would have paid about R120 000 for their bitcoin – which is today worth about R800 000.

This offer effectively means investors will be paid out less than R80 000 per bitcoin, for an asset that is worth 10 times that today.

Africrypt was run by the Johannesburg-based Cajee brothers, who solicited funds from investors by promising returns as high as 10% a day using a computerised trading algorithm.

These promises were even more outrageous than MTI’s claims of 0.5-1.5% returns a day.

MTI was placed in provisional liquidation a year after failing to pay out members’ requests for withdrawals. MTI also claimed to have a computerised trading algorithm, though no evidence of this was found by the Financial Sector Conduct Authority (FSCA) when it looked into it.

Read:An inside look at how MTI managed to prolong an extraordinary losing streak

Beware of scammers promising to recover MTI bitcoin, say liquidators

Similarly, there is no evidence the Cajees were trading the cryptos entrusted to their care.

The Cajees disappeared around the time of the alleged hack, and are believed to be in the Middle East.

The first offer to buy out the claims of Africrypt investors made in November came with a catch: anyone accepting the offer would have to withdraw criminal charges against the Cajee brothers and their affiliated entities.

This condition was likely unlawful, and is referred to as ‘compounding’ in law, which is agreeing not to prosecute a crime in return for a reward.

The second rescue offer presented to investors last Friday (December 3) carries no obligation to withdraw criminal charges.

The first offer specified that the Cajees would be employed by Africrypt, which would be resuscitated as a trading entity so that investors could potentially earn back their full investment.

Investors hoped this would provide them with an opportunity to interrogate the Cajees as to the circumstances surrounding the alleged hack, and whether it was a genuine hack or an inside job. The Cajees have maintained the hack was genuine, and denied any involvement in what some believe was a heist, according to the BBC.

The identities of both the first and second ‘saviour’ investors remain unknown, though Ruann Kruger, legal representative for the Africrypt liquidators, says the second investor is a company.

“I am prevented from disclosing the identity of the company at this stage due to a non-disclosure agreement,” he tells Moneyweb.

“We have no idea of the identity of the first investor,” he adds.

Kruger says so far 35 out of 181 investors have signalled their intention to accept the offer.

Says a representative for some investors: “There are of course suspicions that this offer is coming via a proxy for the Cajees, and that we are being paid out with [our] own money. Either way, this is a clever tactic by whoever the investor is. It’s a divide [and] rule tactic.

“What I see happening here is the smaller investors are going to accept the offer, then the larger investors will be dealt with piecemeal. It’s a clever strategy, but a high risk one, because I believe some of the investors will not accept this offer, and will hold out for a better offer.”

Attorney Gerhard Botha, who is representing some of the investors, says any offer of 65 cents in the rand in any liquidation situation is not a bad deal.

“You must remember that up to now, there’s been no offer on the table. There’s also no proof that there was a hack, and there’s no proof that the money was actually invested [by the Cajees]. There is a strong possibility that this is a great deal for the Cajees, both legally and financially, but at the end of the day investors will make a decision based on purely commercial considerations,” he adds,

In a letter to Africrypt investors sent out on Friday, the joint provisional liquidators say they had not received any further communication or feedback from the first “third party investor” on the amended terms of the compromise offer – which attempted to indemnify the Cajees against criminal prosecution.

This raises suspicions among investors that the Cajees were behind the offer, which they decided to drop when it was pointed out that they could not buy their way out of potential jail time.

The letter from the provisional liquidators says the second offer of compromise is “a good, firm and less complicated offer that is open for acceptance for the next seven days”.

Those who accept the offer will receive 65 cents in the rand for any proven claim within five days of signature.

Africrypt investors are reckoned to have deposited about R120 million, though the value of their stolen cryptos today is worth many times this amount.

MTI liquidators chasing down an additional R2bn in ‘possible debtors’

Written by Ciaran Ryan. Posted in Journalism

On top of the R1bn in bitcoin already recovered from Belize-based broker FXChoice. From Moneyweb.

A company controlled by MTI’s Steynberg and his wife paid close to R1m a month to the latter, which she regarded as a contribution to household expenses. Image: Shutterstock
A company controlled by MTI’s Steynberg and his wife paid close to R1m a month to the latter, which she regarded as a contribution to household expenses. Image: Shutterstock

A clearer picture is emerging of the Mirror Trading International (MTI) scam that relieved tens of thousands of people around the world of their bitcoin (BTC) almost a year ago.

MTI was placed in provisional liquidation in December 2020, and final liquidation in July this year, when it was disclosed that liquidators had recovered 1 281 BTC from Belize-based broker FXChoice. A total of R1.05 billion was recovered from the sale of this BTC.

The latest report by the liquidators published last week shows ‘possible debtors’ of R2.07 billion.

The final liquidators – appointed by the Master of the High Court on November 5 – are Riaan van Rooyen (Investrust Insolvency Practitioners), Herman Bester (Tygerberg Trustees), Jacolien Barnard (Barn Trust), Deidre Basson (Tshwane Trust), Christopher Roos (Sebenza Trust) and Chavonnes Coopers (CK Trust).

Read: MTI: Provisional liquidators appointed

Preliminary investigations show total assets of about R3.1 billion, though further investigation is required to firm up the figures.

JNX Online

In their hunt for assets belonging to the estate of MTI, the liquidators successfully brought an application for the liquidation of JNX Online, a company controlled by former MTI CEO Johann Steynberg and his wife Nerina.

The report says the liquidators are currently investigating the assets and affairs of JNX Online and will report back to creditors in due course.

It seems JNX Online was used by Steynberg to buy and sell BTC and to pay creditors and employees of MTI.

The bank statements of JNX Online reflect monthly payments totalling R933 000 made to Steynberg’s wife.

She testified at the Section 417 enquiry that JNX Online did not owe her this money and she considered this to be a contribution by her husband to the household expenses.

Read:MTI placed in final liquidation, 8 000 more bitcoin traced

MTI CEO goes AWOL, lawyers pull out

Steynberg was sequestrated and a company called Dulospan, which he used to acquire three immovable properties worth R6.5 million, was collapsed into his insolvent estate.

Nerina Steynberg and a friend agreed to transfer cryptocurrency worth R2.1 million into a wallet opened by the trustees of the insolvent estate. The liquidators say legal action is required to interrogate potentially fabricated claims by employees and suppliers of MTI.

Most MTI managers and heads of department received excessive remuneration packages and, from about October 2020, an additional BTC per person per month.

Crypto specialists have been appointed to assist in quantifying and identifying claims from the information obtained from MTI’s back-office platform known as Maxtra Technologies that was run out of India.

Investor numbers

The report says there were a total of 23 691 investors in North America, 10 028 in Canada and 10 563 in Namibia. A total of 181 claims were received from Thailand, out of a total 6 000 claims so far received from creditors.

This is well short of the hundreds of thousands of investors claimed by MTI before it collapsed.

There are a number of possible explanations for this, including:

  • Members who earned more than they invested have been advised that they may have to pay into the liquidated MTI estate, and may therefore avoid making claims; and
  • Many MTI accounts were opened in the name of family members, even pets, in order to earn commissions on introducing new members, thereby overstating the true number of investors.

MTI was the world’s biggest crypto scam in 2020, according to Chainalysis.

Read: MTI was by far 2020’s biggest investment scam – Chainalysis

It’s reckoned that more than 29 000 BTC was channelled through MTI, worth more than R23 billion at current prices.

The scheme offered growth of 10% a month using a proprietary algorithm – which the liquidators and Financial Sector Conduct Authority (FSCA) say they found no evidence of.

MTI collapsed a year ago when the company stopped paying out members’ requests for withdrawals, and Steynberg disappeared without trace.

MTI was successful in marketing itself on social media channels and through referral agents, who received generous commissions for introducing new members.

Implosion

The FSCA blew the whistle on MTI in August last year, and recommended that members demand their money back.

Read:FSCA opens criminal case against MTI, says investigation ‘nearly complete’

MTI profiteers could be asked to pay back the money

MTI marketing went into overdrive and actually expanded its membership in the following months, despite the FSCA warning.

At the first meeting of creditors earlier this year, a claim of R10 billion was lodged by the liquidators.

The second meeting of creditors is due to take place in Cape Town on Friday (December 10).

In a circular issued in August 2021, creditors were advised that liquidators had teamed up with international law enforcement agencies, including the US Federal Bureau of Investigation, to assist in the recovery of funds.

Read: US joins probe into SA crypto firm Mirror Trading

The circular says there is still uncertainty as to the whereabouts of Johann Steynberg. Even though there is a paper trail in the form of an airplane ticket suggesting he fled to Brazil, there is no video or photographic evidence that he actually left SA.

This has given rise to rumours that he either never left SA, or has since returned and has gone to ground.

Enquiries continue

The liquidators say they will continue to investigate the circumstances leading to the collapse of MTI by way of Section 417 and 418 enquiries in terms of the Companies Act.

The same circular advises that those members who earned more from the scheme than they put in are classified as debtors of the liquidated company and may have to repay funds.

Those who received less than they put in are classified as creditors.

Further legal case

A further legal case still to be heard by the court is whether MTI was an unlawful scheme.

Should the liquidators succeed in having it declared an unlawful scheme, it will no longer be necessary to argue that liabilities do not exceed assets or that the payment of profits and commissions were not for value.

This case is being opposed by Clynton and Cheri Marks, two of the most prominent leaders of MTI, who argue that should the liquidators succeed in having MTI declared a pyramid or Ponzi scheme, members stand to forfeit everything to the state.

This was refuted by liquidators in a media statement issued in August.

“If an investment scheme is illegal, profits and referral commissions were not legally owed to the recipients thereof,” reads the statement.

“They can be recovered by the liquidators, for the benefit of those investors who actually lost their capital invested in the unlawful scheme.

“It is also not correct that the money that the liquidators may be able to recover could be forfeited to the state,” it adds.

“Funds recovered will be utilised to pay the real victims [those investors who lost their capital] a pro-rata portion of their claims.”

28 banks now in the crosshairs over rand manipulation case

Written by Ciaran Ryan. Posted in Journalism

The case, first brought six years ago by the CompCom, argues there was an overarching conspiracy to manipulate the level of the rand. From Moneyweb.

Among the nine additional banks alleged to have participated are HSBC USA, FirstRand, Standard Americas, Credit Suisse USA, Merrill Lynch and Bank of America. Image: Mike Hutchings, Reuters
Among the nine additional banks alleged to have participated are HSBC USA, FirstRand, Standard Americas, Credit Suisse USA, Merrill Lynch and Bank of America. Image: Mike Hutchings, Reuters

The Competition Commission this week applied to the Competition Tribunal to expand to 28 the number of respondent banks alleged to have manipulated the rand through private Bloomberg messaging rooms going back to September 2007.

Previously, 19 banks were alleged to have participated in a conspiracy to manipulate the rand.

This week the commission asked the tribunal to add another nine banks to the list of alleged conspirators, who are accused of directly or indirectly fixing the US dollar-rand price by way of manipulating bids, offers, the bid-offer spread and the spot exchange rate.

“The participants to the conspiracy sought to benefit through their participation in the conspiracy by receiving assistance from competing traders to profit, reduce risk and to avoid making losses, when engaged in foreign exchange trading with the USD/ZAR currency pair,” says the commission’s court papers.

Allegations

Traders from participating banks are alleged to have been in frequent and regular contact and communication with traders from other banks via Bloomberg chatrooms to co-ordinate their trading activities, provide each other with information and reach understandings on trading strategies.

Read:Rand-rigging investigator alleges widespread currency collusion [2015]

The dark and ‘smoke-filled’ chatroom that could sink rogue forex traders [2018]

FX-rigging case against 20 banks dealt setback [2019]

CompCom wants authority over non SA banks [2020]

The commission’s complaint before the tribunal says it does not know if the “overarching conspiracy” between the banks has ceased to operate.

The effect of the alleged conspiracy between 2007 and 2013 was an absence of random fluctuations and volatility in the forex market over time and across banks, the use of round figures for market quotes, and a consistent spread of between R0.05 and R0.1 charged by SA banks for the purchase of US dollars, with the exception of RMB.

The commission’s complaint accuses traders from individual banks of participating in a conspiracy.

Banks hit back

Legal teams from the banks chipped away at the commission’s case, arguing that it lacked jurisdiction and had not set out a strong enough case to proceed.

Mike van der Nest, representing JP Morgan, this week argued that the commission’s case rests on 158 chats involving 28 banks over a period of seven years, which does little to advance the argument that everyone in the industry knew what everyone else was doing.

“It’s quite something for the commission to launch a case against 28 respondents. The commission needs to explain the glue, and the facts that make up the glue,” he said.

Chris Loxton, legal representative for ANZ, argued that the case against ANZ was “so remote and weak, that we’re surprised we’re still in this process”.

“The commission has not identified those banks against which there is a solid, winnable case,” he said.

He cited the vagueness of claims against ANZ traders Jason Katz and Murat Tezel.

Loxton conceded that Katz was an enthusiastic participant in these chatrooms, but that there was no participation in these chatrooms alleged after 2012, which was before Katz joined ANZ as an employee.

The commission’s complaint against the traders was problematic for its lack of detail as to the chatroom alleged to have been used, and the day when the alleged conspiracy was supposed to have occurred. The commission claims that a conversation from one chatroom was copied and pasted to another, yet there is no single incident of this nature after 2012 involving Katz or Tezel.

“How is it that the commission arrives at its conclusion that the two individuals were complicit and that therefore ANZ was complicit?” asked Loxton. “The way they do it is by making allegations of conclusions, and not allegations of fact.”

‘Unknown individuals’ also involved

The commission also alleges there were other unknown individuals involved in the conspiracy, the vagueness of which undermines a previous ruling by the Competition Appeal Court for more particularity on the part of the commission’s complaint.

In 2018, many respondent banks filed exceptions or objections to the commission’s case. There was also argument that the tribunal lacked jurisdiction over certain of the respondents, and that the commission had failed to plead sufficient facts to sustain a cause of action. Many banks argued the joinder of the additional parties should not succeed.

In 2018, a majority of the parties sought the dismissal of the case against them in its entirety.

Tribunal order

In 2019, the tribunal ordered the commission to provide more particulars in its complaint and confine itself to its claims of a single overarching conspiracy.

The commission was also required to limit the relief sought against respondent banks without a presence in SA to a so-called declaratory order.

This week’s arguments

Arguing before the tribunal this week, both Loxton for ANZ and Arnold Subel, representing Standard Bank of SA (SBSA), pointed to factual inaccuracies in the commission’s referral affidavit that lays out its case against the banks.

Subel added that the commission’s case did not meet the minimum requirement as set out by the Competition Appeal Court ruling of 2019 as it lacked particularity, nor did it come close to establishing a contravention by SBSA.

In its heads of argument, the commission rebutted claims that it had not provided sufficient facts to support its case, and that it was not required to plead the consequence or effect of every instance of conduct between the implicated traders – as argued by the banks.

The full effects of the alleged conspiracy will be fully ventilated at trial, where the commission will argue that the prohibited conduct should be seen as a whole, rather than a series of isolated instances.

Earlier this week, Nedbank objected to its joinder to the proceedings, arguing that the commission did not validly initiate a complaint against it in 2015. The commission replied that there was no merit in this argument as there is precedent to allow for a party to be cited even after the lodgement of the initial complaint.

The banks the commission applied to join to the proceedings this week include HSBC USA, FirstRand, FirstRand Bank, Standard Americas, Credit Suisse USA, Merrill Lynch and Bank of America.

In most cases, the banks objected on the grounds that the commission lacked jurisdiction.

Swarm of court cases rains down on freight and logistics bargaining council

Written by Ciaran Ryan. Posted in Journalism

Outsourcing group Innovative Solutions Group says it has been defamed and wants R6.5m from the council. From Moneyweb.

Image: Shutterstock
Image: Shutterstock

Innovative Solutions Group (ISG) and its various subsidiaries say they have put up with three years’ worth of insults and falsehoods from the National Bargaining Council for Road and Freight Logistics Industries (NBCRFLI) and have now had enough.

Last week it sued the bargaining council for defamation and R6.5 million in damages over claims by the council that it was operating a temporary employment service (TES) as a way of side-stepping the Labour Relations Act.

The bargaining council has not yet opposed the R6.5 million claim, but this week requested more time to oppose the matter – which ISG’s attorneys have refused. The council says it has instructed its lawyers to oppose the matter.

Meanwhile, ISG and its subsidiaries have applied to the court for default judgments.

ISG also cited the Council’s general secretary, Musa Ndlovu, in its defamation case. This follows a circular issued by the council in July claiming that ISG was operating a TES and therefore falls under the council’s collective bargaining agreement.

ISG says this statement is defamatory and conveys the impression that the company was not law-abiding and was involved in illegal strategies intended to circumvent the law.

“The statements were made with the intention to defame (ISG) and to injure its reputation as a trading entity,” says the summons issued by ISG against the council and its secretary general.

Temporary employment services, also known as labour broking services, are strictly curtailed under the Labour Relations Act because of past abuses whereby workers were denied benefits extended to permanent employees.

The circular issued by the bargaining council informs readers of an ISG subsidiaries called Innovative Staffing Solutions (ISS) and Innovative Staff Holdings (ISH) which purports to take over all clients’ staffing requirements. In terms of Section 197 of the Labour Relations Act (LRA), this means the staffing services provider also assumes “all employment responsibilities and liabilities pertaining to the staff of those clients,” says the council’s circular. It adds that most of the clients taken on by ISS and ISH are transport companies operating within the jurisdiction of the road freight and logistics industry – which places them squarely within the purview of the council. Sector-specific collective bargaining agreements agreed between labour and business have attracted fierce criticism from smaller companies who are not consulted on the terms, but are required to comply nonetheless. The agreements are seen as raising the costs of doing business for smaller companies.

ISG CEO Arnoux Mare says the Council continues to deliberately confuse ISS with ISH, which was liquidated last year. “While a warrant was issued in relation to ISH, there is currently an application pending in the Labour Court for the suspension of the court order which gave occasion to this warrant.

“Innovative Staffing Solutions is a human capital and facilities management subcontractor that permanently employs over 36 000 employees across a variety of sectors such as mining, engineering, construction, retail, agriculture, and transportation and logistics. It does not operate temporary employment services, nor does it break the law. Employees receive a variety of benefits including comprehensive medical benefits, a staff wellness scheme, and provident fund contributions. These benefits far exceed those prescribed by the council, and in addition to a reduction in staff salaries, these benefits would also be suspended to adhere with the council’s prescripts should ISS be compelled to comply with the council’s Collective Agreement.”

In a written response to Moneyweb, NBCRFLI spokesperson Fikile Mchunu said the council had resolved to defend the matter in court and had instructed its attorneys to do so.

The battle for Royal Bafokeng Platinum gets white hot

Written by Ciaran Ryan. Posted in Journalism

Impala Platinum and Northam square up to each other. From Moneyweb.

RBPlat’s assets are among the most sought-after real estate in the PGMs sector. Image: Supplied
RBPlat’s assets are among the most sought-after real estate in the PGMs sector. Image: Supplied

Northam Platinum and Impala Platinum (Implats) are locked in a battle for control of Royal Bafokeng Platinum (RBPlat), though Implats needs this deal more.

Just south of Sun City, RBPlat mines platinum group metals (PGMs) in the Merensky and UG2 reefs on the Boschkoppie, Styldrift and Frischgewaagd farms in the Rustenburg area. These sites account for the last undeveloped Merensky reef on the Western limb of the Bushveld complex.

RBPlat’s assets are the only known significant shallow high grade Merensky resources and reserves still available for mining in South Africa, and this makes them some of the hottest real estate in the PGMs sector.

Implats kicked RBPlat into play in October when it made a cash and shares offer for 100% of RBPlat’s shares.RBPlat’s major shareholder Royal Bafokeng Holdings seemed underwhelmed by this offer, and two weeks later announced it had agreed to sell 32.8% of its shareholding to Northam, with an option to extend this offer to 33.3%.

Read:
Royal Bafokeng Platinum rockets almost 20% on proposed Implats buyout offer

Northam outfoxes Impala Platinum with R17bn Royal Bafokeng deal

This prompted a counteroffer by Implats at R150 a share which, while lower than Northam’s R180 a share, did not account for Implats’s strong dividend flow which would reward shareholders over the longer term.

Read: Implats renews Royal Bafokeng bid, valuing miner at R43.4bn

Implats secured agreements to acquire 24.52% from RBPlat institutional shareholders. The offer is made up of R90 a share cash and 0.3 ordinary shares in Implats per RBPlat share – representing a 22% premium to RBPlat’s closing price of R121.92 on November 24.

RBPlat’s share price hit an all-time high this week of R140, fuelled by the auction now underway for its prized platinum assets.

There’s no question that Implats needs the deal more. Crucially, RBPlat’s operations are contiguous with those of Implats.

Nico Muller, CEO of Implats, told the media this week that this would create a range of operational synergies such as shaft expansions and higher metal off-take.

Implats expects a successful takeover of RBPlat to yield upwards of 600 000 ounces of 6E PGMs (platinum, palladium, rhodium, ruthenium, osmium and gold) a year and extend the life of its Rustenburg Mines by 10 to 15 years.

With just 10 years of production left on these mines, this life extension is vital for Implats.

Battle justified

The fact that RBPlat runs a mechanised, Merensky-rich orebody feeding what is expected to be robust future demand for platinum, nickel and copper, provides a compelling case for the takeover bid by both mining houses.

Explaining the benefits of the deal to RBPlat shareholders, Implats says it provides them with exposure to a global portfolio of PGM assets and a toll refining business designed to capture the full PGM value chain through integrated processing facilities, including wholly-owned smelters as well as base and precious metal refineries.

The deal would also allow RBPlat shareholders to benefit from regional diversification across the Eastern Limb of the Bushveld Complex in SA, augmented by assets in Canada and Zimbabwe, and the planned expansion of processing capacity across the group.

In a statement issued on Monday (November 29), RBPlat notified shareholders of Implats’s intention to make a general offer for the RBPlat shares it does not already own. Implats’s offer is conditional on its achieving a minimum 50.1% in RBPlat.

RBPlat’s position

RBPlat CEO Steve Phiri, responding to the latest offer from Implats, says the focus remains on delivering value to all stakeholders, including shareholders, employees and communities.

“We will continue to engage as appropriate with all bona fide parties in the pursuit of creating value for all our stakeholders. Implats’ offer and the recent acquisition of RBPlat shares by Northam are testament to the value inherent in this business and to the hard work that our teams have put in. We will continue to engage with all shareholders as we ultimately pursue the delivery of value.”

RBPlat has assembled an independent board to review and consider the offer made to all shareholders.

“At this stage the board does not have a view or recommendation of the offer but, in the interest of shareholders and potential value creation, has agreed to facilitate the offer,” said RBPlat in a statement.

Ironically, should Implats succeed in its bid to acquire RBPlat, this will cap a decades-long campaign by the Bafokeng nation for a share of the world’s richest PGM deposits which lie beneath tribal land.

The Bafokeng waged a long and painful battle against Implats and the former Bophuthatswana bantustan for mining royalties, which it succeeded in obtaining under former Implats CEO Steve Kearney, and then converted those royalties into Impala shares.

Now that the elections are over, the brutal reality sinks in for metros

Written by Ciaran Ryan. Posted in Journalism

Of the eight metros, only Cape Town is in any kind of financial health. From Moneyweb.

Cannibalising capital budgets to meet escalating staff bills leaves less money for repairing potholes, burst water pipes and other infrastructure. Image: Dean Hutton/Bloomberg
Cannibalising capital budgets to meet escalating staff bills leaves less money for repairing potholes, burst water pipes and other infrastructure. Image: Dean Hutton/Bloomberg

A post-election analysis of SA’s eight metros by Ratings Afrika paints a grim picture of the financial mountain that confronts the country’s biggest cities.

Only Cape Town – run by the Democratic Alliance (DA) – is in any kind of financial health. The rest are faced with static or declining revenue collections, operating deficits (with the notable exception of Cape Town and Johannesburg) and often massive underspending on infrastructure, which is a key measure of basic service delivery.

“The 2021 municipal elections are now behind us and some political parties celebrate their new-found control of the metros through the election of new mayors,” says Leon Claassen, analyst with Ratings Afrika.

Read: Local government will never be the same again

“Politicians generally make grandiose promises before an election but often fail somewhat in delivering on them afterwards. We believe it might be the same this time round if they do not take a reality check on their abilities to do so.”

Ratings Afrika’s latest Municipal Financial Sustainability Index (MFSI) provides just that reality check.

The MFSI comprises six financial components: operating performance, liquidity management, debt governance, budget practices, affordability, and infrastructure development. The metros are scored on a scale of one to 100.

“Unfortunately the majority of the newly elected mayors, regardless of political affiliation, will soon have to face the reality that their metros do not have the financial capacity to deliver on the promises made,” says Claassen.

Municipal Financial Sustainability Index scores for SA’s metros
Metro (governing party)2020
Cape Town (DA)71
Nelson Mandela Bay (ANC)53
Buffalo City (ANC)50
Johannesburg (DA)45
eThekwini (ANC)40
Ekurhuleni (DA)37
Mangaung (ANC)26
Tshwane (DA)21
Average for the metro municipalities43

It is only Cape Town that can deliver on the promises with confidence, while Tshwane and Mangaung are very likely to fail and the rest will find it very difficult to fulfil the promises made.

Read: The extent of SA’s municipal problem? R51bn, says Ratings Afrika

Government departments not paying their bills

Tshwane’s DA mayor told the SA Institute of Business Accountants conference in September that government departments, many of them headquartered in Pretoria, owe the metro a combined R1.4 billion in back-bills for electricity and other services.

“Metros like Tshwane have accumulated a financial mess over many years, and this is not something that is going to be turned around in a year or two,” says Claassen.

“Even though Tshwane is owed large sums by government departments, this still counts as debtors on the financial statements, and is an asset on its books. Tshwane has a lot more to do to get its finances in order.”

Read: Deputy finance minister welcomes ruling opening way for intervention in municipalities

Claassen says there are two main reasons why these metros will struggle: most are plagued by operating deficits realised, aggravated by weak liquidity – and made worse by poor collection rates.

Metros and municipalities have started cannibalising their capital budgets to meet escalating staff bills, and that means less money available to repair potholes, burst water pipes and other infrastructure.

Mangaung

Municipal Money, a database of municipal finances run by National Treasury, shows that Mangaung in the Free State – faced with a declining cash balance due in part to overspending on its operating budget – spent 38% less on capital infrastructure than was budgeted in the 2019 financial year (the latest year for which figures are available).

It spent 0% on repairs and maintenance.

Ratings Afrika shows that revenue collection at 77% is weakest of all the metros, while fruitless and wasteful expenditure accounted for 30% of its operating expenditure in 2019.

Other weak metros …

eThekwini in KwaZulu-Natal has a fairly consistent cash balance and its revenue collection rate at 92% is well above average (though still short of the 95% target set by National Treasury). It underspent by 28.5% against its capital budget in 2019, with 0% going to repairs and maintenance.

Likewise, Ekurhuleni in Gauteng has seen its cash balance dwindle by more than half since 2015, contributing to an 8.5% underspend on budgeted capital infrastructure projects in 2019. Municipal Money shows its spent 0% on repairs and maintenance in the 2019 financial year.

The City of Joburg has sufficient cash on hand to cover about 1.3 months of expenses, according to the Municipal Money database for 2019, though its underspent slightly (5.1%) on capital infrastructure items. Spending on repairs and maintenance as a percentage of property, plant and equipment was 4.6%, somewhat below the 8% target rate.

Only three of the eight metros – Cape Town, Joburg and Nelson Mandela Bay – have any operating surpluses at all, though Cape Town is far and away the most fiscally sound metro in the country.

Operating performance

Claassen says operating performance is the key driver of a municipality’s long-term financial sustainability.

“With only three metros realising surpluses, the majority are in a very precarious situation with operating deficits that have been accumulating as time goes on.

“As a result of these losses, the metros do not generate sufficient cash to invest in new infrastructure, nor do they retain enough funds for the replacement of obsolete assets and proper maintenance of existing infrastructure, which is required to provide proper levels of services.

“Improving the operating performance of a municipality is not an easy task, as the operating expenditures are rather inflexible and cost cutting a lengthy and difficult process.”

The largest cost item in all metros is staff salaries, and this is where cuts will have to be made.

The ideal ratio of staff costs to total operating expenditures (excluding bulk purchase costs of water and electricity) is roughly 35%. Only Buffalo City and Ekurhuleni are close to this ideal, at 38%. The rest are all above 40%, with Tshwane the highest at 47%.

This leaves ample room for the majority of the metros to reduce their operating costs significantly.

Joburg’s newly-installed DA mayor Mpho Phalatse recently announced a freeze on filling all vacant positions in the city administration. Joburg residents meanwhile continue to complain of incorrect billing and deteriorating service delivery – such as erratic water supply and power cuts.

Neglect

“In the majority of the metros the neglect of the assets is clearly visible and residents experience the discomfort daily,” says Claassen.

“Those metros that still have liquidity surpluses might find themselves in a deficit position very quickly as they continue realising operating deficits, and revenue collections remain at levels which are well below the 95% benchmark,” says Claassen.

“It is disturbing but true that the majority of metros would probably not be able to deliver on election promises unless drastic steps are taken to cut out unnecessary and unauthorised operating expenditures.

“This might be very unpopular and difficult to achieve.”

One of the world’s most profitable crypto mines is in Joburg

Written by Ciaran Ryan. Posted in Journalism

Running off almost free electricity generated by sunlight. From Moneyweb.

Banks of graphics cards solve complex mathematical puzzles at the Libertas crypto mine in Rivonia. Image: Supplied
Banks of graphics cards solve complex mathematical puzzles at the Libertas crypto mine in Rivonia. Image: Supplied

Whirring away in the bowels of an office block in northern Johannesburg is a crypto mine that is rated among the most profitable in the world.

Banks of graphics cards, powered by solar panels positioned on the roof above, solve complex mathematical puzzles and get rewarded in a currency known as Transaction Service Fee or TSF. TSF is the currency used to transact on the Transaction Service Fee blockchain, and is currently valued at about $0.24, which is up about five-fold over the last nine months.

The rising TSF price has attracted crypto ‘miners’ from around the world eager to jump aboard one of the most profitable mining ventures in the world.

Crypto mining has become a massive global business, with its own economy made up of mining ‘rig’ suppliers, developers and the miners themselves.

Why Joburg?

Earlier this year, China banned crypto mining and that drove miners to more congenial locales with relatively cheap electricity like Texas in the US, and Kazakhstan.

Read: China’s Bitcoin crackdown sets up record tweak to mining puzzle

South Africa, with its notorious power grid problems, does not feature on the list of most favoured nations for crypto mining.

Which makes the TSF crypto mine all the more interesting. As crypto prices rise and fall, miners shift their attention to the next gold rush and recalibrate their equipment to the most profitable mining ventures available. And that has put TSF on the global crypto map.

The crypto mine is owned by a blockchain company called Libertas, which is part of a global revolution focusing on smart contracts and blockchain technologies that enable business transactions without the need for agents such as lawyers and banks. For example, wills, insurance contracts and financial contracts can be written in computer code and executed without any dispute or delay.

“It might be strange to some people that we are doing crypto mining from an office park in Rivonia, and doing it profitably, but you need solar panels to do this effectively,” says Libertas chief operations officer Dragan Vidakovic.

The solar panels generate 3.34 kilowatts of power, which is sufficient to power the crypto mine – which produces 1 gigashash (or 1 billion ‘hashes’ or puzzles) per second – and supply the electricity needs of the Libertas office, including lights, computers, air conditioning and other appliances.

The solar set-up generates enough energy to power the crypto mine and meet the electricity needs of the Libertas office. Image: Supplied

A second and much larger 15 gigahash crypto mine is located in Bosnia-Herzegovina in Europe, powered by hydro-electricity.

Both mines are generating TSF coins to finance payments and transactions on the TSF blockchain. Clients are required to purchase TSF ‘tokens’ or coins in order to transact on the blockchain, and this creates constant demand for the coins.

While scores of miners around the world have set up mining operations to profit from the TSF coins, Libertas itself accounts for the bulk of mining activity.

Surplus energy generated by the solar panels is stored in batteries, which keep the mining rigs going during the night hours, with the Eskom grid kicking in for between two and four hours a day, depending on the quality of sunshine during the daylight hours.

The Joburg farm yields about 30 coins an hour, with the Bosnian operation doing 15 times this amount.

“Here in Joburg we have about 12 kilowatts available from the solar panels, and we are only using around half of that, so we have capacity to expand the mining operation – which we will do as demand for the coins increases,” says Asif Aziz, chief technology officer at Libertas.

TSF coins

Demand for TSF coins comes from business customers such as insurance companies looking to remove human agents from their business operations and execute smart contracts based entirely on computer code.

All sorts of business processes are being transferred to the blockchain.

Take the subject of wills, for example. These rely on intermediaries such as lawyers and financial consultants to draft the wills and then interpret them when it comes time to distribute the estate of the deceased person. A far simpler method is to write the conditions of the will into computer code in the form of a smart contract that cannot be altered or disputed later.

Read: ‘The future is crypto’

Demand for TSF coins also comes from those interested in issuing NFTs or non-fungible tokens, which is creating a massive new economy around electronic property rights.

Bitcoin’s Taproot upgrade a prelude to next move up

Written by Ciaran Ryan. Posted in Journalism

The last time a technical upgrade this important happened, Bitcoin traded at $4 000. From Moneyweb.

The series of upgrades allow for greater privacy, cheaper transaction costs and improved smart contract functionality. Image: Akos Stiller/Bloomberg
The series of upgrades allow for greater privacy, cheaper transaction costs and improved smart contract functionality. Image: Akos Stiller/Bloomberg

Bitcoin’s 16% pull-back this week after setting new all-time highs is likely a precursor to another parabolic run-up in price, according to research by DecenTrader.

“As we attempt to break out of the previous all-time high from May this year, it is setting up the prospect of a potential parabolic run-up as we saw in the late stages of the previous bull runs,” says DecenTrader.

Bitcoin recently had its first major technical upgrade in years as Bitcoin Taproot was rolled out. Taproot is a series of technical upgrades allowing for greater privacy, cheaper transaction costs, improved smart contract functionality and the ability to scale using the Lightning Network.

These upgrades allow certain information on the Bitcoin blockchain to remain private, such as the conditions under which Bitcoin may be redeemed for spending.

Read:Bitcoin’s pandemic-era correlation with tech stocks disappears

Bitcoin smashes through R1 million – where to next?

Bitcoin price in USD over one month

Source: CoinDesk

The last time Bitcoin had such a major upgrade was the Segwit upgrade in August 2017, which made the Bitcoin blockchain more secure and scalable.

“At that time the price of Bitcoin was at $4 000, it then went on to rally up to nearly $20 000 in the following four months,” says DecenTrader.

“Will we see a similar rally this time around? Given how bullish many macro indicators are looking right now, and the rush of new money entering crypto, it is certainly possible.”

Bitcoin’s late November pull-back in price came as volumes remained muted and sellers took advantage of high prices to realise gains. The Relative Strength Index (RSI) on the daily chart is now in oversold territory, which is a reliable trigger for buyers to re-enter the market.

If the Bitcoin (BTC) price slips below $57 000, the next target would be $53 000, which is the 100-day moving average.

BTC is still on to run to $85 000 to $90 000 in the coming weeks after ‘trapping’ leverage traders, says DecenTrader. Leveraged traders entered the market on BTC’s new all-time highs and got immediately burnt as the price rally fizzled, forcing them to liquidate their positions.

Bitcoin in USD and Relative Strength Index

Source: Coinbase

Another bullish indicator is the number of “active addresses” relative to price change, which is effective in identifying broad periods where BTC is over- or undervalued.

The indicator has retraced in recent days, representing a precursor for a bullish run-up in price, similar the one we saw at the start of the year.

The rate at which BTC is mined is halved every four years, and that is traditionally followed by a parabolic run-up in price.

The last ‘halving event’ was in mid-2020 and though followed by a substantial price increase, it came nowhere near the parabolic runs experienced in previous halvings, which may be a signal that BTC’s recent run-up in price is just the beginning of a far larger move.