HOW NOT TO MAKE MONEY WITH BITCOIN AS A SOUTH AFRICAN


Investing & Money
piece written on the 8th December 2013 by  

Let me warn you, this is going to be a bit of a rant and if you’re not in the mood for one rather scroll down a little to where I want to offer some tips.

Whilst the rest of the world made an absolute killing on Bitcoin yesterday thanks to China, most of us South Africans sat and watched with envy. See, China went ahead and does what China often does .. moaned about something Internet related. This time it was about Bitcoin and guess what happened? The price of Bitcoin plunged from $1200 odd down to around $560 over night. Of course, the price drop was caused through the fear of the general public, but those who do a bit of trading on any form of stock market will know that this is often a really good time to quickly snap up stock and that’s exactly what we should have been doing. I’ve learnt a fair bit about trading and one thing I try to do is predict what the general uninformed public will do and try to trade in and around them to my benefit. Anyway, China isn’t the be all and end all, what they say isn’t the last word and with the US releasing various statements about Bitcoin being a major player for eCommerce (amongst plenty of other things) is was blindingly obvious that the price would rise again as the dust settled.

So, based on the reading I’ve done and my understanding of Bitcoin and various market places I figured the price would move up from $560 to around half way between $560 and $1200 fairly quickly.

btx-buy-sell

When a stock is so volatile and large corporations are publishing all sorts of speculative information, the price is going to rise and fall a few times – in the case of Bitcoin, because it’s unregulated, there’s more chance of this rather than a stock which could do a huge drop and not recover so quickly. Being fast to get in and out is how you can make a tidy profit. Of course, the adverse could apply. Multiple opportunities in a single day to buy and sell. This is why I’m annoyed..

I’m verified on Luno (a South African Bitcoin exchange) and quickly decided to purchase a decent number of Bitcoins only to realise:

  • You have to top up your account, but because we’re in South Africa an EFT required about 3 days for clearance. 3 DAYS FOR CLEARANCE on a volatile exchange? Bye bye boat.

I sat at my computer arms in the air and watched Bitcoin go from $560 to $720 – that’s a $160 increase per Bitcoin – If you had invested R100,000 and cashed out 3 hours later your return would be worked out roughly as follows:

  1. R100,000 = 17.25 Bitcoins (R5,796.84 per coin)
  2. Price went from R5,796.84 per coin to R7,453.08 (R1,656.24 increase per coin)
  3. Profit = R28,570.14 LESS 0.1% commission LESS R8.50 x 2 for push and pull of funds

GRAND PROFIT: R25,696.13 (taxes excluded).

That’s an hourly rate of R8,565.38 for doing a simple buy on the drop and sell on the rise. (Hope my math is all correct).

Imagine you had access to more money, think of the return on a million rand!

I cannot begin to explain how upset I was about this. I’ve worked in affiliate marketing for going on 15 years and we’re always stuck with this local hinderance when it comes to moving money around in South Africa. This isn’t anything new, don’t get me wrong, I mean, just look at PayPal in South Africa.

So, here are some tips:

  1. If you want to trade Bitcoin locally, make sure your Fund on Luno is topped up with cash. It’ll only cost you R8,50 to put money into your account if I’m not mistaken.
  2. Find a friend who isn’t based in South Africa who could handle the trade for you.
  3. Mt.Gox is the biggest and safest International exchange platform and they do cater for South Africans, but you’ll have to wait at least 10 business days whilst they verify your credentials as their systems are heavily loaded. You’ll also be passing money through forex, so check how your bank’s online system handles this too.

Note: For Luno, you’ll have to have a verified account which requires FICA clearance, so that’s the first hurdle – it’s free, get it done. Also, once you’ve deposited money into your account and purchased Bitcoin, don’t forget to request a disbursement of the Bitcoin to your wallet (I made this mistake and sat stressed out all day due to my wallet not getting credited)!

A great opportunity missed.

Based on the limited number of coins, the interesting take from US authorities, the coin volume movement and the individual large investors I believe that the value will surpass the all time high we experienced last week of $1,200. I don’t think it’ll happen immediately or even quickly though. I do believe we’re in for big changes though and I’d be very careful trading bitcoin without being incredibly tuned in – it’ll take authorities a long time before they can really influence it too much or attempt to regulate it, but it will happen and we need to have withdrawn before then and that’s going to be hard to predict.

Bitcoin is interesting, it’s very possible to make some great returns, but this in my opinion isn’t a long term solution and I’d say you’d do better reading my post on where to invest your money if you’re serious about investing in a more stable and long-term approach. That being said, it looks like the JSE isn’t going to perform too well over the next 3 years according to Bloomberg.

Interesting times ahead, tough enough already let alone being hindered the whole time by authorities.

BDLive published an easy-to-read article called Bitcoins virtually as good as in the bank, which is worth a read if you’re not too familiar with Bitcoin and would like to hear it from a credible source.

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