South African crypto exchanges are witnessing increased activity in deposits and withdrawals after Bitcoin, the world’s biggest digital currency, reached a new high in 2023.
At the time of writing, Bitcoin was trading at a new high of $34 000 (R634 000).
However, the exchanges believe price volatility will continue to be a recurring theme in the crypto-currency market.
Commenting on the rise, Christo de Wit, Luno SA country manager, says the price surge led to an 80% rise in its weekly volumes.
David Porter, GM of AltCoinTrader, says the company’s clients reacted in line with the global trend.
“In other words, we are seeing a substantial increase in deposits and buying pressure coming through, resulting in a price surge of roughly R75 000 per Bitcoin in the last 24 hours,” says Porter.
Positive indications
Explaining the reasons behind the price increase, De Wit says the US Securities and Exchange Commission (SEC) decided not to appeal a court win by Grayscale Investments, which is widely being seen as a sign that Spot Bitcoin exchange-traded fund (ETF) approval is imminent.
“At the moment, there are 12 Bitcoin Spot ETF applications lodged with the SEC. Many analysts believe there is a high probability these applications will be granted simultaneously.
“The upcoming Bitcoin halving in April 2024 is another factor, as historically there have been upward price movements ahead of previous halvings.”
Porter concurs, saying the most recent positive price action is being driven largely by US investors.
“There have been numerous reports of the SEC softening its stance on the multitude of Spot Bitcoin ETF applications, and investors are looking to front-run a potential approval of these applications.
“Specifically, BlackRock, VanEck, Fidelity, WisdomTree, Bitwise and Invesco − representing trillions of dollars in AUM − all have pending Spot Bitcoin ETF applications.
“Finally, yesterday, the biggest of the bunch, Blackrock, had its iShares ETF listed on the website of clearing house DTCC, driving the most recent round of speculation that its approval is imminent, which led to a lot of buying pressure and the inevitable liquidation of short positions.”
The exchanges also reported that the rise in Bitcoin value had a ripple effect on other coins.
De Wit says Bitcoin is up by more than 17% over the last week and is trading on Luno at R650 484 ($33 930). Ethereum is up more than 12% over the past week and trading on Luno at R34 907 ($1 814), he adds.
Other notable movements include Chainlink’s rise of over 30% in the past week, while Solana is up by 27%.
XRP has also seen a surge after the SEC in the US dropped charges against Ripple executives (Ripple is the company behind XRP). XRP is up around 10% over the past week, De Wit says.
Says Porter: “Bitcoin is often described as ‘the rising tide that lifts all boats’ and this time is no different. Across the board, crypto markets are green, and while the Bitcoin price may have increased ~20% in the last week, some of the altcoins have performed even better, with Solana and Chainlink posting greater than 30% gains in the last seven days.”
Unpredictability attracts
De Wit notes volatility remains a characteristic of the crypto market. “Even though we’ve noticed significantly lower Bitcoin volatility over the last few months, it is still driven by the classic principle of supply and demand.
“More broadly, geopolitical turbulence and inflation concerns are creating uncertainty in traditional markets.”
“Personally, I am not sure volatility in the Bitcoin price has ever been a major issue. In nascent technologies, it’s quite natural to see volatility in the price and we find that for many traders, speculators and even investors, volatility is a major attraction to the asset class,” says Porter.
“We are starting to witness more chatter and growing levels of excitement for the ‘Bitcoin halving’ which is expected to occur in April 2024.”
Porter explains that the Bitcoin halving is when the number of new Bitcoin being generated by miners will cut in half from 6.25 Bitcoin per successfully mined block right down to 3.125 Bitcoin, effectively halving the supply of newly-minted Bitcoin.
“These halving events, which occur roughly every four years, have traditionally had a major impact on the price. Should the halving event and the approval of multiple spot ETFs broadly align…we could well be in for an exciting ride next year.”
Closely watched
Jonathan Ovadia, CEO of Ovex, says the exchange is seeing more crypto activity over the past two weeks “and this morning has been a very busy morning”.
He points out that just last week, there was a rumour that the CoinTelegraph published about the iShares ETF being approved by the SEC, which sent Bitcoin shooting over $30 000, only to come back down to $28 000 once the world realised it was false news.
This shows the world’s eager anticipation of this SEC approval, he adds.
“Last night, we saw that the iShares (BlackRock) Spot ETF was listed on the DTCC, which is definitely one of the driving factors of the price. Many analysts estimate that the probability of approval is over 90%.
“This is such a milestone for the world of crypto, as it will allow US and international institutions to access the asset class. Secondly, and unrelated to the spot ETF discussion, the Bitcoin narrative around being a digital store of value (especially in these turbulent times) is also growing. Major market players such as BlackRock CEO Larry Fink have reinforced this.”
For Ovadia, price volatility in the wider crypto market and Bitcoin in particular has decreased steadily over time.
“Volatilities have gone so low, that price movements have been lower than that of many blue cap US equities on the S&P500. I think over time, as Bitcoin becomes more and more adopted and mainstream, volatility will decline,” he says.
According to Farzam Ehsani, CEO and co-founder of VALR, Bitcoin has gained 15% over the last month.
“This comes off the back of global geopolitical tensions and some of the largest voices in traditional finance, such as Larry Fink – BlackRock CEO, referring to this asset class as a 'flight to safety'.
“Bitcoin's rise is juxtaposed against equity markets falling over the last month. At VALR.com, we've seen increased trading volumes given this price action. There have also been rumours that we will soon see the approval of the first spot Bitcoin ETF in the United States which is being well received by the market.”
“We are seeing most of the crypto market, beyond just Bitcoin, react positively to the bullish sentiment in the market.”
Ehsani is if the view that volatility is expected in crypto assets due to the polariaing views across the world about this asset class.
“Some think it’s the future of our global monetary system while others think it's overhyped. This dychotomy of sentiment is bound to yield volatility in the short to mid-term.”
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