Bitcoin investors reap big as price hits Sh4.3 million
Bitcoin holders reaped up to 700 per cent returns on investments after the price of the cryptocurrency rallied to more than $40,000 (Sh4.3 million) last week before settling at $34,000 (Sh3.7 million).
This follows a wild run which started at the onset of the Covid-19 pandemic in March last year when Bitcoin was at $5000 (Sh500,000).
The cryptocurrency, which has been on an extraordinary and volatile eight-month run, has made its holders very rich in a short time, even as the coronavirus pandemic has ravaged the world economy.
A recent report shows that Kenyans are among the most active traders in bitcoin globally and lead the continent in adoption of cryptocurrencies.
“Kenyans and the world at large are beginning to accept bitcoin as alternative investment vehicle, that is part of the reasons it is appreciating quickly,” said William Otiso, a crypto investor.
However, the cryptocurrency’s unusual nature has also meant that many people are locked out of their bitcoin fortunes as a result of lost or forgotten keys.
They have been forced to watch, helpless, as the price has risen and fallen sharply, unable to cash in on their digital wealth.
Of the existing 18.5 million bitcoin, around 20 per cent — currently worth around $140 billion — appear to be in lost or otherwise stranded wallets, according to the cryptocurrency data firm Chainalysis.
Wallet Recovery Services, a business that helps find lost digital keys, said it had received 70 requests a day from people who wanted help recovering their riches, three times the number of a month ago
The rally is also coming from rising legitimisation due to acceptance of crypto assets by hedge funds as a key investment vehicle with Goldman Sachs saying it could replace gold.
Increased demand from institutional, corporate, and more recently retail investors has powered bitcoin’s surge this year, attracted by the prospect of quick gains in a world of ultra-low yields and negative interest rates.
The most popular cryptocurrency climbed as high as $40,402.46 and was last up 6.1 per cent at $39,100.
It crossed $30,000 for the first time on January 2 and $20,000 on December 16.
Ethereum, the second largest in terms of market capitalisation, and XRP, the fourth biggest, gained 1.8 per cent at $1,231 and 31 per cent at 32 US cents, respectively.
Crypto assets
Other investors see the crypto assets as a hedge against inflation amid enormous monetary stimulus aimed at battling the economic devastation caused by Covid-19 pandemic.
Market participants, however, warned a correction could be in the cards after a scorching rally.
“While further growth is inevitable, investors should not expect this to move in a straight line,” said Gavin Smith, chief executive officer of cryptocurrency consortium, Panxora Group is quoted as saying by Reuters.
“The reality is that bitcoin is far from being a magic money tree, nor is it free from downward price swings.
In fact, we can expect dips as sharp as 25 per cent at times as investors periodically withdraw profits,” he added.
Bitcoins surge happened as the market cap for the entire cryptocurrency sector topped $1 trillion (Sh109.9 trillion) last week, according to data trackers CoinMarketCap and CoinGecko.
Glassnode, which provides insight on blockchain data, noted that retail interest in bitcoin has increased the last few weeks, with the number of bitcoin addresses or wallets holding a “non-zero amount” of the virtual currency reaching an all-time high of more than 33 million.
It is estimated that there are more than 18 million bitcoins now in existence, generated by “miners” who also provide the computational power underpinning the blockchain, a digital ledger maintained by thousands of computers worldwide that records transactions made using the currency.
The formula that generates new bitcoins has a hardwired maximum of 21 million coins, meaning supply is fixed.
