eBusiness Weekly
Jeffrey Gogo
Bitcoin this week continued with its roller-coaster ride, smashing through the $20 000 threshold, as Harare-based exchange Golix added two more coins to the list of tradable digital currencies on its platform.
The latest price represents a growth of 33 percent week-on-week.
By 10.30am yesterday morning, bids hovered around $21 000, as sellers looked for anything above $24 000 per each bitcoin.
Dash, Litecoin and Bitcoin Cash, juniour crypto offshoots built on the bitcoin blockchain technology, and traded on the local exchange also, all tracked the main digital currency higher.
It’s not a stampede, but a shortage of liquidity, together with bitcoin itself, has prompted a spike in demand.
Locally, bitcoin now trades at a massive premium, as high as 90 percent, to the global average.
And Golix, Zimbabwe’s only virtual money exchange, does look like the speculators paradise. Short of tokens, some investors have gone wild, asking for as much as $75 000 per bitcoin, a currency propped up by its creators as better than notes and coins.
And others $100 000
It is difficult to take some of the price quotes seriously.
Some like software engineer Jameson Lopp genuinely believe the price is headed in that direction, hitting $250 000 in three years, based on past trends.
Others contend it is a bubble that is soon to burst, much in the same way as the technological stocks craze of the 1990s, with the advent of the internet.
But the motivation here is clear: a stealthy psychological operation meant not only to influence prices higher, but also reflect the general investor expectations on the path that the local price of bitcoin will likely follow in future — or one they would be happy to see followed.
It is noteworthy that at Golix, there isn’t just enough bitcoin to go around.
The bulk of trades are nothing more than a tiny fraction of a single bitcoin, rarely the entire token or more.
Yes, the digital currency can be disaggregated, and sold to the scale of ten thousandths of a bitcoin.
But different exchanges will have different cut-offs for tradable limits.
In the 24 hours to yesterday morning, roughly 0,6 bitcoin had been traded on Golix — that’s under one bitcoin.
For the past 30 days, statistics show 128 bitcoin changed hands on the exchange, or the equivalent of $2,5 million at current prices.
Now compare that with South African exchange ice3x.com’s 24-hour volume of 50 bitcoins, traded at around R220 000 each, almost equal to the local price, according to data on its website.
The pricing dynamics on Golix may thus be a combination of speculation, high demand and foreign currency shortages, and in view of bitcoin’s potential volatility, the virtual money is likely to attract only those investors taken to high risk.
Soaring price, Government’s intervention
Bitcoin has soared more than 2 000 percent since January domestically, due to high demand.
Across the world, in more stable economies, the price hit a record $14 700, up 44 percent from a week ago, according to figures from international exchange Coinbase.
It’s total market capitalisation, a measure of value for every bitcoin in circulation today, has swelled to $246 billion from around $165 billion a few days earlier..
The price surge is attributable to a lot of factors, but mainly due to the virtual currency’s invisibility, a series of “hard forks” or splits, and a lack of government control.
Many people are using it to pay for goods and services online, avoiding the trappings of higher transaction costs or waiting (read queueing) times associated with regular banking services.
Also, bitcoin’s quest to become recognisable as a bonafide financial asset is growing by the day, receiving backing from wealthy fund managers and securities exchanges in the US, as well from the governments of Japan, Australia, Venezuela, Russia, North Korea, South Korea and others.
The US state of New York this week announced the drafting of a bill that “aims to create a digital currency task force” to monitor the “widespread implementation of digital currencies on financial markets in the state.”
In Venezuela, the government of president Nicholas Maduro has said it is to issue a “petrocurrency” — built on bitcoin’s blockchain technology — and supported by its vast resources in oil, gas and other energy-related natural resources.
Now, bitcoin’s phenomenal growth, and its expanding support base, has given the virtual money some credibility, leading some to start to draw parallels with gold, an age-old asset with an above $6 trillion market value.
Indeed, bitcoin is now widely seen as the “digital gold”.
Could a crackdown on bitcoin by governments, specifically the Zimbabwe Government, halt the current bitcoin craze here?
For those equating bitcoin to gold of the digital age, should understand that gold is regulated by governments, we can argue.
“Regulating bitcoin might slow down the uptake of bitcoin, but will not stop people from owning bitcoin,” Soul Kabweza, technology analyst at online magazine Techzim.co.zw, told the Business Weekly, in a voice message.
“Bitcoin is hard to police because it’s a digital commodity traded online, like MP3 files. But exchanges can be easily regulated because exchanges need to open bank accounts and bank accounts are controlled by Government,” he said.
Kabweza said “ultimately the local price of bitcoin will be affected” by any form of Government intervention.
The Reserve Bank of Zimbabwe recently dismissed bitcoin, refusing to register exchanges where the virtual currency is traded.
RBZ registrar of banks Norman Mataruka has said bitcoin “is actually not legal” and that “we will not allow this in our markets”.
New coins
Meanwhile, Golix has added two new coins to the list of tradable assets on its platform, officials said.
This brings to six the total number of digital currencies quoted on the exchange, giving investors a wider option.
Ethereum, the second largest digital currency after bitcoin with a global market value of over $41 billion, and Bitcoin Gold, the result of bitcoin’s second split in November, started trading on Tuesday.
Offers ranged from $25 to $660 for Ethereum, but noone was selling, Golix data shows.
And buyers bid Bitcoin Gold at between $50 and $297, with the asking price well over $500.
“That’s our strategy (adding more tokens) to make Golix a truly crypto-currency exchange,” said Verengai Mabika, the exchange’s co-founder, by phone.
“It takes time and resources though to build enough knowledge of a particular coin, worse off supporting it on the exchange.”
Worldwide, there exists over one thousand digital currencies, some of them scams.
