[TOP STORY] Crypto investors now see possible opportunity

Equities having picked up last week has probably been the major catalyst for the run in the crypto market, reckons Luno’s Marius Reitz.

SIMON BROWN: I’m chatting now with Marius Reitz, GM for Africa at Luno. Marius, I appreciate the early morning time. We’ve seen crypto broadly as a category moving higher the last week or two. What is perhaps most important is that the fear-and-greed index, which had been at ‘extreme fear’ for a protracted period of time, is also shifting higher, suggesting that that folks are starting to say hang on, maybe there’s actually some opportunity here.

MARIUS REITZ: Morning, Simon. Yes, absolutely. I think investor sentiment has picked up slightly. As you mentioned, we are outside the ‘extreme fear’ territory for more than a week now. So I think that’s good.

I think overall the market has looked steady, or Bitcoin especially has looked steady in a range of around $22 000 – $24 000. I think it’s off the back of equities performing better, or equities having picked up last week. I think that has been the major catalyst for the run in the crypto market as well.

SIMON BROWN: Yes. I take the point on that. Certainly we are seeing [in] US equities, our own market as well, less fear sitting there, albeit we are in earnings season in the US. We’ll see how that plays out.

What struck me in a note that came out from you and your team last week is that Ethereum was – and I’m not sure if it still is – actually outperforming Bitcoin; and this is almost an evolution of the crypto space. If we go back 10 years or so it was Bitcoin. Of course it’s a whole lot more than just that these days.

MARIUS REITZ: Yes, absolutely. I think Ethereum is up 23% over the last month. It’s unfortunately down 8% again over the last five days. So we’re seeing a slight dip, and it’s dipped below the $1 500 mark again.

But I think the major catalyst here has been a bit more clarity around the major *** milestone for the Ethereum community that’s coming up in the next couple of months. And that’s Ethereum’s migration from a proof of network to a proof of stake, which is basically in very simple terms a software upgrade that the network is busy undergoing, which will lead to a more energy-efficient Ethereum blockchain network. It will also lead to more efficient use of the blockchain. So it should result in lower transaction fees as well. So it’s a much anticipated milestone for the industry, and I think any bit of clarity there usually is by the market.

SIMON BROWN: And that proof of work – that was the traditional way that cryptos were done, and certainly Bitcoin was that. That was those computers essentially crunching giant math problems and coming to an answer – and that was that proof of stake. You mentioned the fact that it’s a lot lower in terms of energy consumption; undoubtedly a good thing. Does it also speed up processes? There have been claims, particularly in some of the older networks, that the proof of work has actually been a bit of a slow process?

MARIUS REITZ: Absolutely. I think the main benefit will be a more efficient blockchain, especially for payments. So it should drive down the cost of payments. It should resolve in faster payments as well. As you mentioned, I think the Bitcoin network can currently process around seven transactions per second. Now compare that to the Visa network or any of the existing payment systems, which can process up to a thousand transactions per second.

But we’ve seen changes in the technology, we’ve seen the Lightning Network on the Bitcoin side that looks promising, and also seeing upgrades to the way in which the blockchains solve problems, which is basically a proof of work, which is solving mathematical puzzles to prevent anyone from gaining [access to] the system.

And so for Bitcoin that’s proof of work; for Ethereum that’s proof of stake. So there instead of miners competing to solve those problems, now it will revolve around ownership. So if you own a large chunk of Ethereum, then the ** is saying that you can stake the return, that’ll then be used to basically approve and process the different transactions on the Ethereum blockchain.

So it’s a major upgrade, a more efficient way of doing things. And I think it’s following in the footsteps of some of the other cryptocurrencies as well.

SIMON BROWN: Yes. That becomes a trust process. And if someone does cheat in the process, well, it’s that proof of stake that then gets taken.

Marius Reitz, GM for Africa at Luno, I appreciate the time as always.

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