The founders of South African cryptocurrency investment platform Africrypt have disappeared along with $3.6 billion (R51.4 billion) worth of Bitcoin, according to a report….
Bitcoin is heading towards a dot.com crash and is being driven by a “mania” and “market manipulation”, says Bitcoin Foundation executive director Llew Claasen.
“The fact that you have a 30% in value of Bitcoin in one day is dangerous,” said Claasen yesterday, commenting on the rise of the price in Bitcoin yesterday (7 December).
Speaking at Startup Grind event at Workshop 17 in Cape Town, he said there is strong evidence to suggest that some traders are using what he referred to as “tethers” — a digital representation of the US dollar — to push up the price of Bitcoin.
Tethers were created by a company affiliated with Bitfinex, to move into and out of market positions, he said.
There is a strong correlation between the price of tethers and the increase in the price of Bitcoin says foundation head
“Theoretically they are supposed to be as stable as a US dollar, but (in) a digital representation. But nine million of these things were created in the last year and there is enough evidence to suggest that what these things have been used for is to do margin trading and pushing up the price of Bitcoin.”
He said there is a strong correlation between the price of tethers and the increase in the price of Bitcoin. “It’s very dangerous and we shouldn’t assume that all the price in Bitcoin is because of people buying,” he added.
Claasen also referred to the current Bitcoin rise as a “mania” driven by investor exuberance.
He added that there is no doubt that a Bitcoin bubble exists, which he compared to the dotcom bubble of the late 90s — which ended with millions of dollars worth of stocks in tech companies being wiped out.
“What it is, is that everybody suddenly wants to get a piece of the action because everyone else wants to get hold of a piece of action. So you have this virtuous cycle that is driving the price up,” he said.
“I’ve got very mixed views on whether we should view it as an investment, or a long term store of value,” he said. But he believes the price will correct itself.
He added that new futures are going live in the US in the next few days — the Chicago Board of Executives and Chicago Mercantile Exchange.
“There is enough evidence to suggest that the ability to effectively short the price of Bitcoin will drive the price downwards and correct (it),” he pointed out.
Ultimately he believes that those investors who buy and hold Bitcoin will be better off than those who try to make a quick buck by buying and then selling their Bitcoin as quickly as possible.
Featured image: Startup Grind Cape Town chapter head Sandras Phiri in conversation yesterday with Bitcoin Foundation head Llew Claasen.