Bitcoin again captured news headlines as the cryptocurrency surpassed the $54 000 level on Friday. The currency has moved more mainstream with companies such as Tesla and MicroStrategy having recently acquired/added to their holdings, and PayPal allowing 346 million users to buy and spend Bitcoin on their platform. But the explosive rise in the Bitcoin price can also be attributed to it being perceived as a store value by certain demographics (millennials and Silicon Valley types), implying recognition that they have enough clout to influence prices. In this light, it was interesting for us to revisit an opinion piece published by ourselves on 30 November 2017. Shortly thereafter, during the period January to February 2018, the price of Bitcoin fell by 65 percent, and by November 2018 the price of Bitcoin was below $4000, representing an 80% decline from its peak the previous January.
Back to this week, when Bitcoin reached record highs and is now closing in on a market capitalisation of $1 trillion.
The current divergent views on Bitcoin are aptly summarised in today’s Bloomberg News: “Crypto believers are duelling with the sceptics for the dominant narrative around the climb: the former see an asset being embraced for its ability to hedge risks such as inflation, while the latter sense a precarious mania atop waves of monetary and fiscal stimulus.”
Meanwhile, regulatory risks remain: This week US Treasury Secretary Janet Yellen called Bitcoin “highly speculative”, while in January the UK regulator warned that Bitcoin buyers could “lose all their money”.
“Bitcoin is like anything else – it’s worth what people are prepared to pay for it”
– Stanley Druckenmiller, American billionaire, investor, and philanthropist
“Bitcoin is a highly speculative asset”
– Janet Yellen, US Treasury Secretary (as quoted in an interview with CNBC on 18 February)
- There are new “stars” on the investment circuit. The likes of Warren Buffet are being replaced with new messiahs of momentum and influence. When Elon Musk Tweets, millions follow him. This was recently reflected in the boom of Bitcoin surging past $50 000 for the first time, after a massive investment from Tesla. Musk’s influence on Bitcoin is not the only place he has held sway. He has also influenced the GameStop hype, Dogecoin, and Signal. Follow this link for an article documenting how Musk’s Tweets move the market.
- Since the start of this year, Bitcoin has added more than $415 billion of value to stand around $956 billion – this is according to Bloomberg Show.
- More conservative voices have come out against the rush into Bitcoin. Janet Yellen has said that “it’s important to make sure that it is not used as a vehicle for illicit transactions and that there’s investor protection … and so regulating institutions that deal in Bitcoin, making sure that they adhere to their regulatory responsibilities, I think is certainly important.”
- The European Union is looking to inject even more stimulus measures. Billions of euros have so far gone to nationalising payrolls, suppressing bankruptcies, and avoiding mass unemployment during the pandemic. Now trillions more are being considered to stoke recovery.
- US inflation surprised on the downside in January, further entrenching the case for accommodative monetary policy and interest rates remaining lower for longer.
- The Biden administration’s stimulus package is facing bureaucratic blockages while many Americans stand to lose their unemployment benefits in less than a month. It would seem like the House is on track to pass their portion of the proposal but there are concerns that it will not go as smoothly when it reaches the Senate.
- The US ended 2020 with the largest savings on record. This was due to the bull equity market and automatic annual contribution increases lifting the value of investments in accounts that help reduce taxes and encourage long-term savings.
- Former President Trump was acquitted on the charge of inciting the riot at the Capitol, however, the impeachment trial revealed a deeply divided and concerned Republican party. Republican Senator Lindsey Graham said Donald Trump remains the party’s “most potent force” even after his second impeachment.
- Poor weather in Texas is having a knock-on effect in energy markets creating a worldwide problem. Almost 40% of US crude production is now offline, helping push the global benchmark Brent price above $65 a barrel in Asia trading.
- The Biden administration has approached the Taiwanese government for assistance in a worldwide semiconductor shortage that is halting US car production. This shortage has caused disruption to global supply chains as car makers slow production and companies like PlayStation cannot meet production demands. The cost and difficulty of mass-producing semiconductors has fostered a growing worldwide dependence on two Asian powerhouses – Taiwan Semiconductor Manufacturing and Samsung Electronics. This has only been exacerbated by the ongoing trade tensions between the US and China.
- Rupert Murdoch, along with a group of other investors, are creating two right-wing news services in the UK which will largely be based on a blueprint of Fox News in the US.
- Ace Magashule, along with 15 other defendants were charged with 74 crimes, including money laundering, fraud, and corruption, adding to previous accusations levelled against them. The charges relate to an audit contract issued while Magashule was premier of the central Free State province.
- For those who think that Ace Magashule is on his way out of the ANC, Richard Poplak has written an article about how Magashule is in the strongest position to defeat South African democracy. Follow this link for the article.
- Jacob Zuma refused to appear before the Zondo Commission on Monday, raising questions on whether he will be arrested. Deputy Chief Justice Raymond Zondo said that he was seeking an order from the Constitutional Court, to “impose a term of imprisonment on Mr Zuma.” Additionally, police minister Bheki Cele went to visit Zuma at his Nkandla residence this week. These two developments represented moves against Zuma’s game plan to play the structures of bureaucracy, resulting in him never appearing before a court or going to a prison cell.
- The National Income Dynamics Study – Coronavirus Rapid Mobile (NIDS-CRAM) survey has disclosed that “of those who lost their jobs in April, only half were employed again by October, while about a third of those who had jobs in October were unemployed in February 2021. This suggests substantial churning in the labour market, which no longer looks the same as it did before the pandemic inspired lockdowns”.
- The Gauteng High Court has granted Eskom the allowance to increase tariffs by 15% in the 2021/2022 financial year. This will have an adverse effect on the input costs of the South African economy.
- South African tax law was amended to allow SARS a 30-day interest-free reprieve when having to pay back taxpayer’s money owed. However, such relief was not applied to taxpayers who are liable for interest on the money owed to SARS, from the due date of payment.
- In the largest medicine bust of the year, R126 million worth of Ivermectin was seized at OR Tambo. Ivermectin has gained popularity as an alternative treatment for Covid-19.
Sources: Dynasty, Reuters, Bloomberg Markets, The New York Times, Daily Maverick, and Moneyweb, etc