Advertisement
Australia markets closed
  • ALL ORDS

    8,205.50
    -3.10 (-0.04%)
     
  • AUD/USD

    0.6597
    -0.0023 (-0.34%)
     
  • ASX 200

    7,963.70
    -7.40 (-0.09%)
     
  • OIL

    77.56
    +0.60 (+0.78%)
     
  • GOLD

    2,413.00
    +5.70 (+0.24%)
     
  • Bitcoin AUD

    100,860.05
    -632.59 (-0.62%)
     
  • CMC Crypto 200

    1,370.16
    +4.27 (+0.31%)
     

Aussie had no idea 'leftover crap' was $155k 'goldmine'

Bitcoin is volatile to say the least, but some are cashing in. Take heed: This is no guaranteed pay day.

From now, you can feel free to cut off that brand-new Lamborghini in traffic. It’s not going to be a mafia guy driving. Nope, it will be a nerd. Because bitcoin has gone crazy, topping $100,000 (US$69,000).

Millions of dollars are floating around in cryptocurrency land, and they love bitcoins.

How the heck did this happen?

There was absolutely no reason to think bitcoin would survive 2023. Not when central banks started raising rates and money started flowing away from speculative assets. Not when the market for NFTs died. Not when tech companies started their rounds of layoffs.

And yet. Behold. Amid a graveyard of ‘altcoins’, one cryptocurrency is still standing. Correction: standing proud. It is not merely ticking along but has risen to a most unlikely all-time high. In both US dollar and Australian terms, bitcoin is at a record.

Bitcoin chart showing the value hitting $100,000 in Australia and a comparison to USD high.
Bitcoin has rallied again, but it can be rocks and diamonds for investors as the cryptocurrency is hard to predict. (Jason Murphy)

Do you have a story to tell? Contact yahoo.finance.au@yahooinc.com

It is not the only thing rising. Gold and real estate are at records too. The value of assets is rising, perhaps in response to the rise in price of consumer goods.

ADVERTISEMENT

The rise in bitcoin is also lifting the value of other elements in the crypto universe. Some people who had coins lying around find themselves sitting on a goldmine!

Worth checking, if you ever dabbled.

Is manipulation playing a part?

Let us not stand here and pretend the rise in bitcoin is all the result of pure market forces. Bitcoin markets are not regulated in the same way as stocks and bonds. Bitcoin is not considered a security by the US Securities and Exchange Commission and it does not regulate it.

Also by Jason Murphy:

For example, you can do wash trading in bitcoin -that’s where you buy the thing you’re selling at a higher price, making it look like the market is bidding it up.

Bitcoin also has a most peculiar relationship with an entity called Tether. Tether claims to be backed by billions in US Treasuries but has repeatedly declined to be properly audited. Some have been smelling a rat here for a long time. Their arguments look pretty compelling but that rat has not chewed through the foundations. Not yet.

The way the bitcoin market is concentrated, with a small share of wallets owning a large share of bitcoin, makes it easier to manipulate than a lot of other markets, like real estate where ownership is far more dispersed.

Is it all smoke and mirrors?

But you could manipulate all the altcoins too. And yet many of them didn’t make it. Plus the manipulability of bitcoin hasn’t changed recently. Manipulation is definitely part of what is happening, but not sufficient to explain the recent rise of bitcoin.

What bitcoin has, without doubt, is a brand. It’s akin to Biro or Uber, where the brand name is almost synonymous with the category. By establishing itself first, bitcoin entered public consciousness. That means that when people think of cryptocurrency, they think of bitcoin.

When bitcoin starts rising, normal people start piling in.

Among the normies that have bought in is me. Full disclosure: my exposure is pretty small though. I put in about $4,000 and am up by about 50 per cent. Profit after tax – and I do declare and pay tax on any capital gains – will not be life-changing. And that’s assuming it doesn’t plunge before I sell out! Last time, I sold out too soon, as the next chart shows. This time it seems likely I will overcompensate for that mistake and hold too long.

Follow us on Facebook, LinkedIn, Instagram and X (Twitter) + subscribe to our newsletter.

Bitcoin
Bitcoin (Jason Murphy)

The halving

Markets work on the principle of supply and demand. Supply of new bitcoin comes from mining. But the amount mined runs according to a schedule. And in 2024, the amount being mined will fall by half.

At that point, the flow of new bitcoin supply into the system will shrink. The halving will happen on April 20 - about six weeks from time of writing.

The halving comes at an interesting point, where bitcoin has become a mainstream entity. You can buy bitcoin through the stock exchange now - indirectly, through an exchange-traded fund. That institutional interest may also be propping up demand for bitcoin and driving it higher.

The confluence of these two factors is a possible explanation for the recent run-up in price.