Picture: ISTOCK
Picture: ISTOCK

Johannesburg cryptocurrency exchange AltCoinTrader has added a bitcoin product linked to the US dollar to its platform in a bid to attract foreign investors and drive down bitcoin’s premium in the local market.

Owing to supply and demand dynamics, bitcoin tends to trade at a 6%-7% premium in SA, according to Richard de Sousa, partner at AltCoinTrader.

By opening up the market to foreigners, the three-year-old exchange is banking on arbitrage trades to narrow the valuation gap over time.

In July, AltCoinTrader added a new trading pair, bitcoin/ USDT. Tether’s USDT cryptocurrency, a so-called "stable-coin", is backed by US dollars.

"The trading pair is quite important because it allows people to buy bitcoin without using rands," De Sousa said.

The product was expected to eventually become "very sought after" as it opened the door to US and other investors.

"They will level the price [of bitcoin] and make it more competitive. There are massive arbitrage opportunities.

"It won’t happen overnight, but those who see the opportunities and are willing to take them will benefit tremendously, and this benefit will trickle down to the man in the street because the price of bitcoins in SA will become closer to the international standard."

It had been "near impossible" for foreigners to trade bitcoin in SA, as they would first have had to bring money into the country, "and there’s a lot of red tape around that".

Naspers-backed exchange Luno does not allow purchases of bitcoin in SA using dollars.

De Sousa said AltCoinTrader planned to run a marketing campaign in the US in the coming months, after "ironing out any kinks".

As on other exchanges, trading volumes on AltCoinTrader have cooled following the cryptocurrency sell-off in the earlier part of 2018.

hedleyn@businesslive.co.za