Bitcoin stages a comeback in 2019
Digital coin triples in value thanks in part to Facebook’s own cryptocurrency plans
Bitcoin, the flagship digital coin that spectacularly crashed in late 2017, has staged a comeback in recent months — tripling in value since the start of 2019 thanks in part to Facebook’s cryptocurrency plans.
Bitcoin rose to fame when its value surged about 2,200% in a year, before the bubble burst in December 2017, wiping out half of those gains in slightly over a month.
But the steady decline that followed — partly because of moves to regulate digital currencies and several high-profile hacks — was arrested in January.
Data from Naspers-backed exchange Luno shows that the local price of bitcoin has risen from R58,860 at the end of 2018 to R174,000 on Thursday, despite a 10.8% fall on the day after Federal Reserve chair Jerome Powell flagged “serious concerns” about Facebook’s plans to launch its own cryptocurrency, libra.
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Despite Thursday’s decline, bitcoin is now worth about two-thirds of its high of R264,825 reached on December 11 2017.
Analysts say the resurgence is partly due to Facebook’s libra plans, which will add credence to the broader digital currency market. Some investors are even said to be using bitcoin as a type of “safe haven” asset, since it is uncorrelated with traditional asset classes and offers protection from stock routs, for instance.
Barry Dumas, a market analyst at Purple Group’s GT247.com, said on Thursday bitcoin prices were also benefiting from an expected “supply shock” in 2020. “The cost of bitcoin mining seems to be taking its toll, as the mining reward — bitcoin — has decreased by half over the years, with a shortage of the cryptocurrency expected to come through by 2020,” Dumas said.
But not everyone is sold, including local money manager Vestact.
“There are many reasons why we do not like it,” Vestact analyst Bright Khumalo said in a note to clients this week. “The thing is very volatile, people hide in the shadows as they use this cryptocurrency to do illegal transactions on the dark web, and then there is the constant hacking of your coins,” Khumalo said.
Another turn-off is that bitcoin “consumes electricity by the boat-load”.
Citing data from the University of Cambridge, Khumalo said bitcoin consumes 61.76 terawatts per hour of electricity a year — more than most countries use. “If bitcoin were a country, it would be the 41st most energy-demanding nation on earth,” he said.