Almost everything about 2020 was unprecedented. If you’re an investor, much of the year was probably about securing your position and reducing exposure to risk. But, as December rolled around, it seemed the year had one more ‘unprecedented’ twist in the tale, for good measure. Bitcoin began one of those rare bull runs that become the talk of the trading floors. Once the black sheep of the asset class family, cryptocurrencies suddenly stood front and center.
Of course, not everyone was surprised. Veteran HODlers and crypto backers had seen the merits of the highly inflation-resistant asset class for years.
Noted Arab ‘Whale’ Khurram Shroff, and his IBC Group, have been long term investors in Bitcoin, and virtually every other cryptocurrency. So who better to engage in a tête-à-tête on the subject? We asked Khurram what he makes of this meteoric rise in crypto valuations. Is this a false dawn or a new beginning? Read on, to hear what one of the GCC’s largest crypto HODlers has to say, on these and other crypto-related matters.
We recently saw a BTC sell-off to $33k. Why?
In my opinion, a lot of that was to do with people cashing in for hefty profits. In fact, because of this recent bull run, about 300 members of the IBC Group, across 190 countries, retired on the 7th of January 2021, with a few million each – a really proud and satisfying moment for me, and the entire IBC family. But, to my mind, this sell-off will only result in greater participation by institutional investors, adding to the mainstream acceptance of Bitcoin, and cryptocurrencies in general.
What are the other main reasons behind the recent BTC price boom? Does technical data hide a story as well?
Coin scarcity has played a big role in raising the price of Bitcoin, as any supply-side constraints always do. But you are also correct to assume that there’s more to this price boom, from a technical perspective. Apart from limiting the number of coins, the creator of Bitcoin Satoshi Nakamoto hardcoded the Blockchain with a halving event, which automatically halves the reward per block, every four years. There have been three such events so far, and each has resulted in a surge in price. The last of these halving events was held in May 2020 and its influence is also part of the current bull run.
How influential are Bitcoin Whales in price fluctuations?
Well, Whales are pretty influential, when it comes to market fluctuations in cryptocurrencies. This is largely because they are market making, on a non-custodial basis, worldwide. For instance, 65% of the mining power comes out of China, but the majority of the transactions happen in North America. So, it’s definitely the case that different Whales and different pools of crypto can create market fluctuations of up to 3 to 6 percent, quite easily.
Many experts believe Bitcoin is a bubble that will eventually burst. As a main investor in BTC, why do you believe this is not the case?
This is actually a quite widely held opinion in certain circles, and not just currently. In fact, such statements have been made since Bitcoin’s inception. One of the main reasons I beg to differ is that the amount of crypto-mining infrastructure, which has mushroomed to back Bitcoin, is to the tune of $30 to $50 billion dollars – the estimates vary. In fact, I believe this infrastructure is one of the reasons for the current value of Bitcoin. And there are many significant actors that have become involved, including many public companies in the US that are holding significant quantities of Bitcoin. States and cities around the world have done the same. Bitcoin has really grown in stature in 2020, not just price. Universities around the world are running courses on Bitcoin, as a use case for Blockchain technology. So, I believe it is here to stay. There’s room for improvement in scalability and robustness, and I believe Blockstream and other developers are working to achieve this.
If and when the US and global economies improve and trust in top fiat currencies return, will BTC keep on playing a role as an inflation hedge?
Yes, there is a possibility that economic recovery could drive a lot of those who have recently entered the crypto market, especially Bitcoin, back to traditional fiat currency holdings. But one of the advantages that Bitcoin has is that it has become famous all around the world. The number of people who either know about Bitcoin or are interested to know more about it has really exploded. This will inherently lead to an increase in adoption, and therefore prices, regardless of whether or not some opportunistic investments are redirected to fiat currency markets, in the event of an economic revival. So I believe that increased adoption will sustain prices, for the foreseeable future.
The current bull run is also being exchanged for fiat currency for commendable reasons, such as for charitable causes. For instance, VirgoCX, a Toronto-based fiat-to-crypto trading platform, is supporting the SickKids Foundation, by exchanging cryptocurrency for cash donations. CanETH Pool, a Canada based institutional-grade staking service for Ether, which is backed by me, has bought the Non-Fungible-Token, or NFT, for the design of the Ethereum token. The NFT was donated by 3iq, one of the largest crypto funds in Canada.
Blockchain is still largely in the realm of cryptos with little adoption and use cases in other sectors. Can you explain that? What is your take on Blockchain?
Many sectors of the economy are now creating Blockchain and crypto-based value holding mechanisms. Now with Ethereum 2.0 addressing some of the scalability issues through the ‘proof of stake’ model, and the amount of activity in the DeFi space, I believe 2021 is the year that crypto will find mainstream acceptance. To your question about BTC bolstering Blockchain use, I certainly believe so. It has already generated huge interest as a use case, but the possible applications for Blockchain are even wider and each new innovation that uses Blockchain will add to its adoption.
What is your advice on investing in Alt-coins? Do layer2 DeFi solutions spell trouble for Alt-Coins and Blockchain?
My advice really depends on which Alt-coin we are talking about. As in every investment class, each individual asset has specific strengths and vulnerabilities. For instance, one would be wise to remember 2017, when countless Alt-coin entered the market and eventually around 97% of their value was lost. Anyone interested in investing in Alt-coins should educate themselves about the market, the asset class, and look at each individual offering in its wider context. In terms of DeFi, I am certainly a believer in the concept, as well as the technologies backing it. That was one of the primary reasons I was so proactive in ensuring that the Ethereum 2.0 beacon chain crossed its threshold after the launch seemed destined to fall short, for a while. Within the last year, we have seen around $16 Billion in investments locked in behind DeFi. But I don’t really see it as a problem for Alt-coins, because DeFi is a way for developers to create innovative financial products, which can easily co-exist with crypto. In fact, there are sure to be products that leverage the advantages of both.
Stablecoins: Will Facebook’s Diem, CBDCs, pose a threat to BTC?
Well, there are a lot of issues we can see, with US dollar Tether – one of the leading fiat collateralized stablecoins. Tether has just issued $800 million worth of coins, but I believe they have some inherent risks, especially since they are not sharing their bank account holdings for some time. In terms of Facebook’s Diem, they’ve had to re-launch it, after initially using the name Libra, and they also have some regulatory issues. Nevertheless, Facebook is a very powerful entity, and if their coin gains worldwide acceptance, it could be a global currency of sorts. So, it’s something to look out for. In terms of Cash Backed Digital Currencies, they are not really a threat to BTC. In fact, I think people are likely to use Tether and CBDCs to park their Bitcoin gains, and then go back to Bitcoin when it is gaining in value.
Any BTC price predictions in 2021?
To be honest, I believe Bitcoin has already exceeded the price that any of us who got on board in the initial days had ever imagined. So, even if it sustains this value, or increases by 10 to 20%, it will result in a lot of fresh adoption of Bitcoin, expanding the investor pool and increasing demand. I see this as a huge positive because when the valuation rises to the hundreds of thousands, a lot of people will benefit from the bull run. There is widespread Bitcoin adoption by public companies and this could lead to a lot of price hikes. But I believe there will be a lot of cashing-in and profit-taking, because of those price hikes as well, which will lead to periodic corrections.