The entrance to the Park House of Events sits atop the Hyde Park shopping centre in Johannesburg, but the queue of attendees for tonight’s event snakes down the stairs and extends into the mall’s sixth-floor parking lot. The #CryptoTrader event, the sixth such outing, has sold out all 500 spots.
To busy themselves while they wait, many attendees browse on their smartphones. Others begin to talk in crypto-speak.
“I’m seeing my arse on the T-rex,” says one attendee, referring to a particular cryptocurrency. “Ja, I’m also seeing my arse,” says the other. “But I bought cheap.”
Another rattles on: “So I asked him to please tell me what ICOs he is investing in. He’s been putting money in when they start and has been hitting the jackpot every time.”
ICOs, or initial coin offerings, are essentially a fundraising mechanism for new cryptocurrency ventures — and it’s a buzzword among tonight’s guests and speakers alike.
The majority of attendees appear to be white and — in line with studies suggesting bitcoin investors are men between the ages of 25 and 35 — the crowd is suitably fresh-faced and testosterone-laden.
As I listen in, it occurs to me that blabbering on about bitcoin bubbles is perhaps a bit like berating teenage sex — one may have a view that is a pretty bad idea but some are going to do it anyway, so best help them to be safe. And those in the crowd at this CryptoTrader event are clearly well past the point of just fooling around — one attendee claims to trade several million dollars in cryptocurrency every month.
Having skyrocketed 1 200% in value last year, bitcoin may be the conversation had around every braai in the country at the moment but it accounts for only $250‑billion of a global cryptocurrency market valuation totalling $770‑billion.
Instead, investing in “altcoin” (cryptocurrencies released after the success of bitcoin) appears to be all the rage among these attendees. Take the ripple cryptocurrency as an example. Although the XRP token was worth just $2.45 on December 30 2017, it had grown in value by 35 000% in the space of a year, rising from $0.00635909 in January 2017.
Convening tonight’s proceedings is Matt Brown, host of a podcast branded as the Matt Brown Show. Wearing a navy blazer paired with jeans and camel-leather shoes, Brown’s fashion choices echo what much of the audience is wearing.
“What you hear here tonight is not financial advice,” he warns from the get-go, lightheartedly noting that this declaration is on the insistence of his legal team.
In the hope of having #CryptoTraderZA trend on Twitter, Brown encourages the audience to tweet before introducing the speakers — Ran Neuner and Luke Martin.
Neuner cofounded and headed up the Creative Counsel activations company but now channels his energies into all things crypto. His Twitter profile describes him as a host on CNBC’s Crypto Trader and his moniker is Cryptoman.
Flown in from the United States, the youthful Martin is introduced as an “@VentureCoinest” with more than 100 000 Twitter followers. Only his cheerful blue-green and purple striped socks break his professional surface.
Neuner says of Martin: “I follow him on Twitter and he calls it right every single time.” Brown interjects that “this is not financial advice”, and the audience chortles.
Quite early on in the evening, the question of a bubble arises. Bitcoin prices have been widely criticised as being unsustainably high and doomed to burst. The likes of billionaire Warren Buffett have described it as a “real bubble” and JPMorgan head Jamie Dimon has labelled bitcoin “a fraud”.
When the question is put to Martin, he is quick to say that bitcoin could well be in bubble territory and ripe for a crash. He estimates a price correction of 40% or 50% could be on the cards.
But such a dire forecast matters little to the speakers and the crowd. Bitcoin is passé. The price is too high, and there are plenty more cryptocurrencies to invest in now. If you can come in at the bottom floor with the right crypto, they say, you could make a killing.
A lot of people are moving into these so-called altcoin cryptocurrencies but there is no way of valuing these assets, Martin warns. “It’s entirely speculative, it’s extremely emotional and there are a lot of biases,” he says. “Investor psychology is important; people are always looking for the next bitcoin.”
Martin and Neuner advise to look at the market capitalisation of the coin before investing in it.
For example, the ripple token, a popular cryptocurrency, is not nearly as pricey as bitcoin — but there are significantly more ripple tokens in issue than bitcoin. The result is that the two have a similar market capitalisation. So, if every ripple token fetched the same price as a bitcoin, the ripple market cap would be three times the gross domestic product of the US — and “that’s not going to happen”, says Neuner.
Martin and Neuner say it was important to look for sectors of the economy that blockchain will disrupt. Blockchain is the revolutionary technology on which bitcoin, and now other cryptocurrencies, is run.
It’s important to look at the intended use of the tokens as well as the development team behind it. Martin says he looks at how the developers interact with token holders on Twitter when assessing a potential investment.
Neuner reiterates throughout the event that he was “severely allergic” to Ripple, despite describing it as one of the best blockchain companies in the world but with a token that had no practical use in the near future. “It’s best to have sold when I did at 3.24 [the price reached in early January]. If you haven’t — sell,” he says.
Brown earlier remarked that Neuner had even taken a short position on ripple (meaning he will make money if the value drops), and says he is “only going to sell when there is blood on the streets”.
The power goes out and one audience member quips: “The banks, the banks have it out for us. They knew.” The audience members busy themselves on their smartphones briefly until the lights flash back on.
Neuner says keeping one’s money on the exchange is one of the greatest risks to investors. “I’ve seen it before where these exchanges close down and there is no one to talk to.” He suggests moving the crypto into a “hard wallet”. A hard wallet stores the user’s private keys in a secure hardware device, with a number of these resembling a flash drive.
Asked about his investment strategy, Martin says he is never “all in” or “all out” but is rather about managing the downside risk. In his trading portfolio, his aim is always to exit the investment as it nears its highest price.
Martin says he is keen on projects that drive decentralisation, anonymity and interoperability in the crypto world. For example, he likes the 0x project that seeks to drive interoperability between decentralised applications.
Says Neuner: “Crypto is your most risky investment. The least risk in there is the top 10. So buy an index in the top 10. If one goes down, another will go up.”
But if you are going for 50 times return — and if you are in crypto, that’s assumed to be the case — Neuner recommends sidestepping the likes of bitcoin and ethereum and putting money into ICOs.
He says he assumes these investors are not perturbed about the money at risk. Neuner, however, offers a warning on ICOs where the white paper — a document that provides key information on each particular project — typically states there is no obligation on the developers to follow through.
Legally nothing can be done, he explains. He stresses that potential investors must do their homework.
Martin warns that one needs to assess each ICO and what its developers aimed to achieve — with some, it doesn’t take long to figure out that it is just a fundraising mechanism and “that’s probably a red flag”, he says.
Ultimately, Neuner says he doubts anyone in the room could call the market. With crypto trading, he recommends doing the opposite to what your emotions tell you to do. “That moment when you think you are godly … sell,” he says. “When you think it’s the end of crypto … you feel like crying … and you can’t breathe … buy.”
Neuner says he speaks from personal experience, after once selling in a panic only to rebuy the crypto six hours later and at a 30% premium.
Crypto markets move more quickly than others and, he thinks, it’s because so many people are trading the exact same token at the same time all over the world. The general rule, however, is never to sell crypto on a downturn and always to sell when it’s up, Neuner says. Brown interjects: “And never take advice from social media, or this panel.”
Because bitcoin and other cryptocurrencies are not recognised by the South African Reserve Bank, it is not regulated. As such, what financial advice is dished out by who is of no concern to the Financial Services Board, which says it cannot take action on issues over which it has no jurisdiction.
Crypto dip sets Twitter aflutter
A rapid fall in the bitcoin price this week had people asking: “Has the bitcoin bubble finally burst?”
The cryptocurrency was trading at $14 351 (R179 000) on Sunday when it began its dramatic descent, which bottomed out at $9 378 on Wednesday before a recovery set in. By Thursday morning, bitcoin was trading at $11 500.
Other cryptocurrencies, ripple and ethereum, also experienced a price dip and recovery.
Some observers believed there was no discernible reason for the sudden price drop, but others attributed it to fears about the banning of cryptocurrency in South Korea, Russia and China.
As the price plummeted, social media was abuzz. @Zerohedge tweeted: “Bitcoin below $10k — Did The Bubble Just Burst?”
Nobel laureate @paulkrugman wrote: “So bitcoin just lost half its value … More than ever, this looks like a bubble.”
Said @BitcoinCryptoMM: “Remember, buy low sell high. Pretty much the worst thing you can do is sell crypto during a dip. Historically it always comes back up and the more you can buy at the bottom of a dip the better.”
Ran Neuner encouraged his followers to buy while the price was dipping. He later tweeted: “This dip was worse than the other 4 we had last year. Main reason is that there are mainstream investors and they are not astute enough to hold and don’t understand crypto volatility. I imagine that the more mainstream the harder the corrections will be. The old hands will gain.” — Lisa Steyn