Bitcoin hits R1.5 million

The price of Bitcoin shot past R1.5 million overnight on South Africa’s largest crypto asset exchanges as it topped $89,000 per coin internationally.

This comes after Bitcoin completed its fourth halving event in April — a mechanism built into the blockchain’s protocol that halves the rewards paid to miners for validating transactions.

Bitcoin’s pseudonymous creator, Satoshi Nakamoto, sought to use the halving mechanism to maintain an eventual hard cap of 21 million Bitcoin to prevent the cryptocurrency from becoming inflationary.

As a result of this halving, the daily reward paid to miners will drop to 450 Bitcoin from 900.

Specifically, it reduced miner block rewards from 6.25 BTC to 3.125 BTC.

While much has been written about the incoming Trump administration’s pro-crypto stance in relation to the recent price action, Onramp Bitcoin co-founder Jesse Myers has said the halving was the real reason.

“Yes, the incoming Bitcoin-friendly administration has provided a recent catalyst, but that’s not the main story here,” said Myers.

“The main story here is that we are 6+ months post-halving and that means a supply shock has accumulated,” he continued.

“There’s not enough supply available at current prices to satisfy demand.”

Myers believes the only way to restore supply-demand price equilibrium is for the Bitcoin price to go higher.

“Which will flywheel into mania and a bubble, but that’s how this thing works,” he said.

“It sounds crazy to say there will be a reliable, predictable bubble every four years. But then, there’s never been an asset in the world where new supply creation is halved every four years.”

Myers said the result of the halving is a post-halving bubble.

“It’s what happened after the 2020, 2016, and 2012 halvings. And now it’s taking shape again,” he said.

“Welcome to the post-2024 halving bull market. This thing goes much higher.”

Myers provided the following chart to illustrate his point.

Bitcoin’s record-breaking rally saw the cryptocurrency jump about 32% since the US election on 5 November, hitting an all-time high of $89,599 early on Tuesday.

Trump has vowed friendlier crypto rules, and his Republican Party is tightening its grip on Congress to push through his agenda.

Other pledges include setting up a strategic US Bitcoin stockpile and boosting domestic mining of the token.

His stance is a sharp break from a crackdown on the divisive industry by the Securities & Exchange Commission under President Joe Biden’s administration.

The shift has energized speculative buying of large and small tokens alike, raising the value of digital assets to about $3.1 trillion, CoinGecko data show.

‘Red-Hot’ Play

Bitcoin is in “beast mode,” Chris Weston, head of research at Pepperstone Group, wrote in a note.

“The question for traders not already set is whether there is still room to chase this red-hot play or wait for a slight retracement and for some of the heat to come out of the impulsive trend.”

In the options market, investors are lining up bets that Bitcoin will pass $100,000 as soon as the end of the year, according to data from the Deribit exchange.

Meanwhile, software firm MicroStrategy Inc. — the largest publicly-traded corporate holder of Bitcoin outside the exchange-traded fund sector — bought about 27,200 Bitcoin for some $2 billion between 31 October and 10 November.

Stretched Rally

Bitcoin has more than doubled so far in 2024, helped by robust demand for dedicated US ETFs and interest-rate cuts by the Federal Reserve.

The rise in the token exceeds the returns from investments such as global stocks and gold.

Fairlead Strategies LLC technical analyst Katie Stockton in her latest research note said “it would be natural to see a period of digestion after such a steep run-up,” recommending a “short-term neutral bias.”

Digital asset companies spent heavily during the US election campaign to boost candidates viewed as favourable to their interests.

Against that backdrop, Trump did an about-face, becoming a supporter of an industry he once labelled a scam.

His backing turned Bitcoin into one of a range of so-called Trump trades.

Others include US stocks and the dollar, both of which have also been advancing given Trump’s focus on domestic economic growth, tax cuts and protectionist tariffs.

Reporting with Bloomberg