Bitcoin crash is not something new
CAPE TOWN - Bitcoin, which sank to below $10 000 (R119 406.50 ) in value after reaching an all-time high of $19 783 last December, is showing steady growth, according to Richard De Sousa, a partner at AltcoinTrader.
Responding to questions from Business Report this week, De Sousa said while many people would consider this a correction, this was something that had happened many times in the past, it is not something new.
“We have had corrections that lasted 411 days to be exact, that was after the last all-time high. If you take out out the period November/December 2017 and just cut out that section in the graph, you will see a steady rise in the price through the years.
“We believe that there will be another bull run in the future and once again there will be a correction,” he said.
De Sousa explained that AltcoinTrader’s view was not a speculatory one and the exchange believed in the long-term increase and positive fundamentals of Bitcoin. “We believe in the fundamentals that this technology is disruptive and it will change financial landscape.”
He said Bitcoin was neither a currency nor a commodity. “It is at this stage forging its own path. The closest thing that we could consider it to is a store of value. It is not something that is traded back and forth very much, so we should be careful in its classification.”
Supply and demand influence Bitcoin’s value. De Sousa said the value of Bitcoin fluctuated very much on the mood of the media and investors. “It does have an intrinsic value and that value is determined by the amount of work, effort and energy that is spent to create these Bitcoins. However, the market adjusts and changes this value depending on the media hype and the potential that Bitcoin has to disrupt the financial industry.”
He explained that the cryptocurrency’s value was determined by the hundreds of thousands of clients that are on crypto exchanges. No exchange has any control of the price. “It is an important fact to know, that it is only what someone is willing to sell for and what others are willing to buy for that determines the price.”
Cryptocurrency exchanges recently came under the spotlight after the Hawks said that they were investigating a major Bitcoin scam that might have affected thousands of South Africans. The scam was reported to have originated from a company called BTC Global, which is said to have had more than $50 million worth of investors around the world.
De Sousa said some type of regulation was needed to recognise cryptocurrency exchanges, where exchanges would need to pass certain criteria so that they are held accountable.
“By regulators giving certain exchanges a stamp of approval especially local ones, and encouraging local business and nurturing the cryptocurrency market, there won’t be a need for South Africans to go internationally and they could take care of their crypto needs through grassroots exchanges that exist locally,” he said.
Cryptocurrency is without borders but the on-ramp is a local exchange. De Sousa said it would be incredibly difficult for one to buy cryptocurrency with rands in global exchanges, as there are exchange controls and South African Revenue Service regulations.
Cryptocurrency is generally quoted in US dollar terms as well as most commodities such as oil and gold. De Sousa said to quote in US dollar terms was normal, “however, there is a local price in Bitcoin, we normally find that is between 5 percent to 9 percent higher than the international rate, simply because it is difficult to get money out of the country because of the exchange controls, so it is at a slight premium once it is in South Africa”.
Bitcoin has been trading at an average of $10 123.20 over the past 30 days, according to data from XE Currency Converter.
- BUSINESS REPORT