Weekend Argus (Saturday Edition)
As bitcoin gets bigger, question is: When will it burst?
ANALYSTS warn that a bubble is forming as bitcoin breaks fresh records.
Senior market analyst Neil Wilson said this week: “Maybe the mania is peaking, maybe it’s just getting going. Either way, bitcoin is still being bid up to the gunnels to hit a fresh record high at $16 000 (R218 448) ahead of the launch of futures trading from Sunday night. It’s a bubble in its dynamic; we just don’t know when or how it will collapse.”
He warned that a regulatory crunch was coming. “This is to be expected and the recent price action may in part be explained, not just by the advent of regulated futures trading, but also by bulls ramping up prices while the going is good.”
Wilson said: “You’re not going to regulate cryptos out of existence, nor would governments and central banks wish to stop Blockchain technology. But they can regulate crytpos to a point where they destroy the value in any one version by taking control of it for themselves.”
Meanwhile, Martin Walshaw, senior systems engin- eer at F5 Networks, said that for many experts, Blockchain (a software platform for digital assets) continued to have a range of limitations.
Analysis from the Open Data Institute ( ODI) highlighted a range of potential security stumbling blocks, including interoperability, privacy issues and the need to find information within Blockchain.
“Users of bitcoin should be well advised to do their due diligence before making investments... In the wake of recent high- profile breaches, now is the time for users to protect passwords and be vigilant with on-line behaviour,” he said.
Elize Botha, managing director of Old Mutual Unit Trusts, said a significant portion of risk associated with bitcoin was as a result of the largely uncertain standpoint being taken by legislators and regulators.
“It is important to remember that bitcoin only dates back to 2009, making it a very young and enigmatic asset class.
“New asset classes of this nature, regardless of their potential for speculative shortterm return, are inherently volatile and carry a high degree of investment risk – the dot-com bubble during the 1990s comes to mind in this respect,” Botha said.
South Africa has in recent months taken significant steps toward solidifying a regulatory framework for bitcoin and cryptocurrencies.
The SA Reserve Bank earlier this year announced that it would begin to trial a number of regulations pertaining to virtual currencies.
Bitcoin’s ascent, however, has not been without speed humps. Countries such as Morocco, Bolivia, Kyrgyzstan, Ecuador, Bangladesh and Nepal have banned bitcoin.
China earlier this year announced the closure of domestic cryptocurrency exchanges. While it hasn’t outlawed bitcoin, it has made trading or owning it a challenge for its citizens – and bitcoin is banned from banking institutions.