Who’s got N$144,000 spare change for a single Bitcoin?
The price of Bitcoin is exploding having topped US$10,500 on Wednesday morning. The crypto currency has also recently been included for listing by the Chicago Mercantile Exchange, and the price is published daily by the Economist courtesy of Capricorn Asset Managers.
Financial expert, Dr Daniele Bianchi, Assistant Professor at Warwick Business School in London, commented on Bitcoin’s astronomical rise, alluding to investors’ fears that it is the most recent demonstration of a classic textbook hyper-bubble.
Professor Bianchi said: “Despite fears about the Bitcoin ‘bubble’ bursting, the price of the new digital coins is going through the roof. Indeed, the increasing demand pressure from investors and speculators makes the case for an even further increase in Bitcoin prices in the near future.
“As the supply of Bitcoins is kept fixed by the underlying protocol, price increases are essentially due to increasing demand.”
“Bitcoin is becoming more like an asset class rather than a method of payment. This is something that the public and regulators should realise to fully understand the price dynamics of Bitcoin.”
“In a sign of accelerating demand pressure, the number of active Bitcoin wallets has grown almost five-fold over five years. Similarly, the number of exchanges has been increasing exponentially since early 2017, partly driven by the explosion of the Initial Coin Offering (ICOs) as a funding strategy to set new marketplaces, and partly driven by increasing margins and profitability due to increasing Bitcoin prices.”
“Demand pressure is essentially driven by two things. Firstly, the increasing awareness by both the public and investors that crypto currencies are here to stay, and secondly, the increasing professionalisation of crypto currency trading.
“A clear sign of this is the announcement by the Chicago Mercantile Exchange group, the world’s leading derivatives marketplace, to launch futures contracts on Bitcoin by the end of 2017. The Exchange already publishes both a Bitcoin reference rate and a real time index.”
In September this year, the Bank of Namibia declared Bitcoin outside the law stating that the Exchange Control Act of 1966 does not make provision for trading in crypto currencies. Despite the central bank’s stance, the Economist knows of several Namibians who are active Bitcoin investors.
The Bank of Namibia stated then that Bitcoin is not recognised as legal tender in Namibia, nor is it a foreign currency. Virtual of crypto currencies are neither issued nor guaranteed by any central bank or commodity, the bank said in a special report, explaining that the lack of a legal framework prevents it from endorsing any form of crypto currency.