Analysts are betting on cryptocurrency, Bitcon, to trade at record levels in 2017, following its adoption by Ponzi Scheme, MMM in Nigeria and also the fear that the Chinese currency, the yuan suffers more pain under Donald Trump’s presidency and a strengthening US dollar.
MMM, the Russian based Ponzi scheme, which has become popular in Nigeria, opened shop on 14 January with its Nigerian clients accounts converted to Bitcoin equivalent. However, BusinessDay found out that participants in the scheme are allowed to change from bitcoins to naira. But the option of holding accounts in the crypto currency will likely lead to a surge in demand for the digital currency in Africa’s largest economy. Before the closure of the MMM platform in December, an estimated three million Nigerians had their money in MMM.
Also the relationship between the Yuan and Bitcoin is such that when the yuan weakens, the bitcoin jumps. And as more investors hedge against currency risks, analysts project the bitcoin could more than double in price by the end of 2017.
Saxo Bank, which first invested in bitcoin as early as 2014, tips the currency to soar as high as $2,000 this year. Saxo Bank trades over 179 forex currency pairs.
Bitcoin was trading at $776 as at 12.00GMT (12noon Nigeria time) on Friday, January13.
The Central Bank of Nigeria (CBN) and the Nigeria Deposit Insurance Corporation (NDIC) have already set up a committee to study bitcoin, a move which has been applauded by many analysts.
“It is commendable that the CBN is looking into bitcoin. Because if they chose to ignore it, the traditional banks will be ‘disrupted’ which is not good for the economy. We should expect some kind of statement on the position of the Federal Government on bitcoin this year,” said Tope Aladenusi, Chief Strategy Officer at Deloitte Nigeria.
He added that “Ponzi schemes, like MMM, will become more fraudulent with the adoption of cryptocurrencies and the economic situation.”
MMM, in a statement to participants, said it will start receiving payments in bitcoin when it resumes operations on January 14. The ponzi scheme with three million registered Nigerians said the decision is due to the recent sharp price fluctuations of the crypto currency.
It is expected that if demand for bitcoin jumps due to MMM adoption, prices may edge higher. However, other analysts have cautioned that the currency is very volatile and could lead to loss of investment.
“If you really wish to invest, consider doing so with licensed investment organisations,” Aladenusi said via his Twitter handle.
One reason analysts cite in favour of investing in bitcoin is supply. Bitcoin supply is fixed as there are only 21 million of them in existence. According to Laura Shin, Forbes bitcoin analyst, “once 21 million bitcoin are released (a number that will be reached around 2140), the system will stop creating new coins.” The fact that bitcoins are not released arbitrarily ensures its stability over time. She also noted that over the next 100 years or so, the rate at which the supply of bitcoin increases will slow – every four years, the number of bitcoin being released will be halved, further preserving its buying power.
Another reason to consider in favour of bitcoin is that as it becomes more ingrained in society; individuals, groups, businesses and government embrace and use it for day to day transactions, the less volatility the digital currency experiences. Already businesses are starting to pay more attention to the digital currency.
In the past few days, the price of bitcoin has been the major subject of discussion in the global market. It began with the rollercoaster surge of the cryptocurrency to a high of $1,153 the first time in three years. It eventually came crashing to $887.47 – more than 11% according to data from the Coindesk Bitcoin Price Index, sparking different speculations the digital currency was experiencing déjà vu.
In November 2013, the currency rose to a record $1,200 per bitcoin. The value dropped a few weeks later to less than half of its high and further down to $200 in early 2015. It began climbing back up in 2016 and got to its present high.
According to Chris Burniske, author of “Bitcoin: A Disruptive Currency”, “Given its predictable growth and ultimate fixed supply, bitcoin could become a store of value superior to fiat currencies in the long term.”
Jesse Hallet projects that if bitcoin become stable, as the world economy and the number of coins on the market does not, the value of bitcoin should gradually increase over time. It is however difficult to speculate how much it will increase but if we are to consider Peter Smith’s forecast, that the value of bitcoin may not be going back to its 2015 lows.