Taking a five-year view on bitcoin – is it a hold?

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Bitcoin’s infamous volatility may have weakened over the past year, but don’t expect it to go away completely.

After hitting an earlier high of $ 20,000 in December 2017, Bitcoin fell 84% the following year to a low of around $ 3,500 before resuming its next bull run, which took it to a new all-time high above $ 63,000. The exhilaration of these wild fluctuations is attracting an ever-growing community of traders and risk-hungry investors to Bitcoin.

Bitcoin has been shown to be able to drop 20% in a day or two without disrupting the entire bull pattern. This makes it a sought-after asset for traders who want to take advantage of rapid price fluctuations.

However, there are great ways to make money from crypto without taking any risk, such as: B. to buy overseas and sell at a profit in South Africa. This practice is called arbitrage and it turns South Africans into relatively risk-free profits. Learn more about arbitrage today.

Bitcoin’s volatility is due to several factors:

The message cycle: The US Treasury Secretary warned in February that Bitcoin was an “extremely inefficient” way to conduct monetary transactions, causing prices to drop by 20%. But that was after Elon Musk announced that his company Tesla had bought $ 1.5 billion worth of Bitcoin, fueling a price surge of nearly 30%. Bitcoin is nervous when it comes to restrictions and regulations, but even if countries like China, Pakistan, and Nigeria have raised regulatory barriers to crypto entry (usually by cutting ties between exchanges and banking sectors), the price has quickly moved away from that bad news recovered.

Changed perceptions around the Bitcoin store of value: Only 21 million Bitcoin are ever issued, so the offer is fixed (despite its almost infinite divisibility). The only other factor that can change is demand, which is influenced by investors’ risk perception. These perceptions are acutely high at the moment as the Joe Biden administration in the United States is printing an extraordinarily large amount of money. Bitcoin has proven to be the fastest growing fortune in the last decade and possibly all time.

Adoption rate: Bitcoin was originally limited to tech geeks and cryptographers and today has more than 100 million people who own or have owned the coin. According to some predictions, the adoption of crypto will hit a billion in the next decade. Not all of them will be Bitcoin holders, but many will be. In countries with foreign exchange controls and high inflation, the acceptance of citizens who try to protect their assets from a devaluation of the national currency has increased significantly.

No central control authority: This is a key factor in Bitcoin’s volatility. This is an attraction for many who view central bank money printing programs as the ultimate ruthlessness, while others prefer to stay away from something that does not enjoy the oversight of central bank regulators.

Bitcoin halves: The rate at which Bitcoin is mined is halved every four years, and this has been shown to have a profound impact on price. The previous halving took place in 2020 and the next one in 2024. There is no direct link between halving and price, although the previous two halves preceded a sharp rise in prices over the next two years.

Price predictions

Bitcoin has grown at an incredible average annual growth rate of 200% per year over the past decade, meaning it has very little correlation to traditional risk-weighted assets.

The fact that this has happened historically is certainly no guarantee the pattern will continue, especially since we have already seen the potential for massive drawdowns. However, this gives us a yardstick by which to measure future price movements.

Ovex CEO and Founder Jon Ovadia sees a price north of $ 250,000 as an achievable goal within the next five years. “This is an achievable goal given the expected increase in the Bitcoin adoption rate in the coming years, and by some estimates it could be rather conservative. In any case, it would be wise for most investors to hold at least some bitcoin in order to benefit from the growth of this new financial architecture that will conquer the world over the next decade. “

Ovex’s arbitrage service

Another relatively safe way to gain access to cryptocurrencies is through crypto arbitrage. Ovex was founded more than three years ago to give businesses and retail investors access to crypto arbitrage and to make risk-free profits from price differences in crypto in different markets. Cryptos like Bitcoin can usually be bought on foreign exchanges and sold in SA at a slight premium, usually between 2% and 4%. Rather than exploring arbitrage opportunities with Bitcoin, Ovex found that arbitrage profits are more predictable with a stable coin called TrueUSD, backed 1: 1 by the US dollar. TrueUSD is issued by TrustToken in San Francisco.

These arbitrage opportunities are available in most countries with exchange controls, although the arbitrage gap varies based on demand. A stable coin backed by a regulated currency such as the US dollar or the rand is a crypto-asset that is widely used by investors to park profits made on other cryptos in a secure asset, that does not move in parallel with the rest of the market.

Ovex’s OTC desk

Most of Ovex’s business is an over-the-counter (OTC) counter that allows large buyers of crypto assets to be quickly transacted without the risk of a market shift.

This is important for any company or family office that may be looking to diversify into crypto assets like Bitcoin. A large purchase of, say, R 20 million or R 50 million would be noticed on regular exchanges and drive prices up. Ovex is able to eliminate this problem by processing large crypto orders in a way that does not move the market. It does this because it has deep financial support and sophisticated computer systems.

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Kindly supported by Ovex.

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