The R1m bitcoin is now in sight. Where to now?

Written by Ciaran Ryan. Posted in Journalism

It was inevitable, say crypto watchers. The bull market is far from over, but it will be a bumpy ride. From Moneyweb.

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

For the second time this year, crypto came within sniffing distance of R1 million this week. On international exchanges, it set new all-time highs on Wednesday, trading at $66 000.

By way of comparison, bitcoin traded at around R14 000 at the start of 2017, and ended that year at R310 000, before commencing a brutal 84% drawdown that took it all the way back to R50 000. It then started a long climb to R974 000, which is where it traded on Wednesday.

It came within a whisker of R1 million in April, but failed to cross that key hurdle, and instead lost roughly half it value over the subsequent months before bottoming out at around R445 000 in July.

Bitcoin’s ability to surprise to the upside remains undiminished. It has increased 70-fold since the start of 2017, with some analysts now pegging $80 000 and even $100 000 as the next price targets, with much of the momentum coming from news that bitcoin ETFs (exchange-traded funds) have been green-lighted by US regulators.

“(Reaching R1 million) was inevitable and we’re just beginning,” says Farzam Ehsani, CEO of crypto exchange VALR.

“Bitcoin and crypto are still a dot on the financial horizon of the world. It will continue to become more and more prominent with the passage of time.”

Says Marius Reitz, Africa GM for crypto exchange Luno: “The bitcoin price started trending at the beginning of the month when speculation began on the coin’s ETF approval. The first bitcoin ETF $BITO started trading this week and this news is being priced in. We’re seeing a lot of positive sentiment in the market, not only on the ETF side, but also bitcoin being recognised as legal tender in El Salvador and progress on the regulatory front. The cryptocurrency market remains volatile and the price isn’t guaranteed to only go up. We’ve seen many similar rallies and pullbacks over the years.”

Luno, like most exchanges in SA, has seen accelerating customer sign-ups as the crypto bull market builds a head of steam. It added more than one million new customers in just over four months, says Reitz, with some 30% of these coming from SA.

Adds Richard da Sousa, CEO of crypto exchange AltcoinTrader: “R1 million is not an international milestone, but it is for us South Africans. We’ve been predicting R1 million for bitcoin for many years, even though others were scoffing at the suggestion – but we’re just about there.”

Josh Miltz, co-founder of crypto investment company BitFund, says the R1 million bitcoin is something he expected would arrive sooner or later, and this makes it the sixth most valuable asset in the world.

A decade of records

“As the fastest growing asset class of the decade, returning 10 times more than the Nasdaq 100 on an annualised basis, bitcoin’s continued growth is not a surprise, except perhaps to regulators, who continue to frown upon one of the best assets in the market.

“Since 2011, bitcoin’s cumulative gains equate to a whopping 20 000 000%; 2013 was bitcoin’s best-performing year, during which it gained 5 507%.

“Bitcoin is the fastest asset to reach a $1 billion market capitalisation, which it did in 12 years,” says Miltz.

Bitcoin posted annualised losses for just two out of 12 years since it was launched, falling by 58% and 73% in 2014 and 2018 respectively. History suggests it is likely to continue growing, albeit with returns lower than previous years.

Adds Miltz: “In our view, as the cryptocurrency market continues to mature, and as innovation continues, bitcoin’s growth will drastically increase. It should come as no surprise that assets may, in the future, be priced in bitcoin, similar to how numerous other cryptocurrencies are now priced in bitcoin. As global citizens start pricing their financial systems in bitcoin as opposed to a fiat currency denomination, such as rands, we have no doubt that this will cause the price of bitcoin to increase and it will arguably become one of the most valuable assets on the planet. In fact, we believe that countries will either adopt bitcoin as a currency, like El Salvador has done, or invest their treasury reserves into bitcoin.”

While the R1 million-mark may be a way-stop to much higher prices, investors should expect bumps along the way. Trends can change and the volatility should be monitored by investors, says Miltz.

“It is easy to get caught up and fear missing out in a bull market, so all allocations to cryptocurrencies should be made with risk capital, and follow the principles of diversification to minimise risk.

“For this reason, we always recommend investing in cryptocurrency portfolios, to ensure a wide variety of exposure to various cryptocurrencies.”

Ciaran Ryan

The Writer's Room is a curated by Ciaran Ryan, who has written on South African affairs for Sunday Times, Mail & Guardian, Financial Mail, Finweek, Noseweek, The Daily Telegraph, Forbes, USA Today, Acts Online and Lewrockwell.com, among others. In between he manages a gold mining operation in Ghana, and previously worked in Congo. Most of his time is spent in the lovely city of Joburg.