What’s next for Bitcoin? Wild ride as regulators in SA, elsewhere explore crypto currency controls

The price of crypto currency Bitcoin has been swinging wildly. Meanwhile, there are growing expectations that digital currencies are set to become more mainstream. In South Africa, the Financial Sector Conduct Authority (FSCA) has invited comments, by the end of this month, to its draft declaration aimed at introducing some controls around trading in currencies like Bitcoin. Trading in crypto currencies has become popular in Africa as it is elsewhere, with scammers moving in to take advantage of the lure of easy financial gains. This is highlighted, as MyBroadband.co.za notes, by the example of Mirror Trading International (MTI), whose CEO Johann Steynberg disappeared, leaving investors out of pocket. The tech-oriented website notes that in January 2011, one Bitcoin cost just under R2 – and this year it has been trading for more than R500,000. In this podcast, we hear from market participants and experts about what might be next for Bitcoin – from the regulators as well as in terms of its price trajectory. – Jackie Cameron

Bitcoin: Interview snapshots

  • There are a lot of institutional buyers out there and there’s very little supply. It’s become the popular institutional trade for against the dollar inflation, hedge or gold.
  • Some believe it can go to $45,000 to a trillion dollar currency this year.
  • “You could even see governments and Treasury Department start buying Bitcoin, which may sound far fetched, but two years ago, corporations buying Bitcoin for the balance sheet was crazy, too.”
  • Regulation will help the price because it increases the perception that Bitcoin is “legal” and “safer”.
  • The Coinbase IPO could enhance the price, with Wall Street driving up the value of the crypto currency broker and custodian.
  • Coinbase “is going to put a lot of media frenzy around this whole industry”.
  • Meantime, Ripple – a large crypto currency platform – is being sued by the Securities Exchange Commission. It is accused of illegally marketing XRP, the world’s third-largest cryptocurrency, reports CNN.
  • Bitcoin ‘has arrived’, with regulators working towards protecting traders
  • This rally is “very much being led by the institutional capital allocation to the space, which is very different to the what we saw in late 2017”.
  • “As far as its utility as a payment method goes up, the integration into the likes of PayPal’s platform, I guess, is a step in the right direction. There’s also a whole heap of additional scalability improvements being worked on the technology itself.”
  • Whilst this rally “has definitely been much more institutionally led, we are seeing signs of retail interest and activity starting to follow on. Now, you know, if you look at the number of times Bitcoin has been Googled, again, it’s those levels of five times what they were just a few months ago. So the rally is definitely garnering the attention of not only the institutions, but the retail end of the market as well”.
  • Regulators globally collaborating cross-border “is starting to happen…We have industry bodies who are working on collaborating across borders”.

Bitcoin tops $35,000 (about R530,000) for fresh record as wild swings resume

By Dave Liedtka and Eric Lam

(Bloomberg) – Bitcoin jumped to another all-time high on Wednesday as extreme swings continued to buffet the world’s largest cryptocurrency.

The famously volatile digital coin advanced as much as 6% to $35,842, surpassing the previous high set Jan. 3, and was trading at $34,757 as of 8:17 a.m. in New York. It had plunged as much as 17% on Monday. Bitcoin quadrupled in 2020.

A range of factors have been cited for Bitcoin’s ascent, showing how hard it is to pinpoint the proximate cause for the latest bout of volatility. Some traders pointed to a JPMorgan Chase & Co. long-term price forecast of as much as $146,000, while others cited fear of missing out, or FOMO, on the record rally.

“Clear bull market, and we’re not getting 30% to 40% drops like in 2017,” said Vijay Ayyar, head of business development with crypto exchange Luno in Singapore. “The market is more mature with bigger buyers. Keep in mind though that we’re in a parabolic phase and they do top out.”

While the latest price swings may be reminiscent of past boom and bust cycles, Bitcoin’s ability to reverse its slide so quickly this week suggests institutional investors are not abandoning the space, said Matt Long, head of distribution and prime products with crypto brokerage OSL in Hong Kong.

“Monday’s dip was instructive as institutional investors used the opportunity to buy in,” he said. “Institutional investment is firmly in the digital asset sector, and potentially accelerating.”More institutions and noted investors, from Paul Tudor Jones to Scott Minerd and Stan Druckenmiller, have either started allocating funds into Bitcoin or have said they’re open to doing so.

‘Chase higher’

“The chase higher is back on based on the notion that bigger main street investors are interested in building longer-term positions,” said Stephen Innes, chief global market strategist with Axi. “This is all about the new age embrace of blockchain technology to which Bitcoin is so uniquely intertwined.”

Some argue that the cryptocurrency offers a hedge against dollar weakness and inflation risk in a world awash with fiscal and monetary stimulus.

“If inflation picks up, or even if it doesn’t, and more companies decide to diversify some small portion of their cash balances into Bitcoin instead of cash, then the current relative trickle into Bitcoin would become a torrent,” Bill Miller of Miller Value Partners LLC wrote in a blog post.

But others say retail investors and trend-following quant funds are pumping up an unsustainable bubble.

“Bitcoin is better at being gold than gold is at being gold,” Anthony Scaramucci, founder and managing partner of SkyBridge Capital, said in an interview Tuesday. The firm is the latest to get on the Bitcoin bandwagon, launching a crypto-centric fund this week.

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