Thoughts on SA’s Graylisting and Bitcoin Projections

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SIMON BROWN: I’m now chatting with Sean Sanders from Revix. Sean, I appreciate the early morning. I want to talk about Cathie Wood and her Bitcoin goal of $1.48 million. Before we do, graylisting on Friday. You mainly run a financial services business. What is the direct impact when you wake up on Monday morning to your operations and your, I guess, relationships with clients?

SEAN SANDERS: Good morning, Simon. Thank you very much for joining me again. I’ll start with the graylist side of things. Yes, it is not good news for South Africa. I don’t think there will be any meaningful change in the short term. But when we start to expand more aggressively internationally – and we’re busy looking at Kenya, Zambia, Nigeria – of course all the banks in those regions are going to look at us and say, look, South Africa is now a gray-listed country, let’s do a little more due diligence. [For] international customers of ours, we are not just a South African business, of course. Customers coming from Europe are going to look at us a little more skeptically. So I think overall it is not a good move for the country. Of course, that’s the obvious thing to say, and we need to work aggressively to remove ourselves from this list.

SIMON BROWN: For you, it’s not that you can’t go to any of these markets, it’s just that there’s more paperwork, there’s more Fica, there’s more proving who you are and your bona fides.

SEAN SANDERS: Yes, exactly that. When you connect with crypto-financial services, oh my god, you go to a bank and the bank is going to say, ‘Really? You come from a greylisted country. So you can have whatever regulatory support you want, but when you’re greylisted, it just makes it that much more difficult. I think that is what many South Africans are going to start experiencing.

SIMON BROWN: Yes. It’s going to be, with the massively increased paperwork and all that stuff. But let’s take on Cathie Wood, founder of ARK Investment Management. Her ARK Innovation ETF is perhaps the best known there. She is also known to post what are sometimes some crazy predictions. But credit to her, she gets them quite often. I remember one of her early Tesla predictions seemed crazy until the stock price got there. She’s looking at $1.48 million per Bitcoin by 2030. I thought that story was about halving, but she says maybe that’s part of it. This is because there is a greater adoption of Bitcoin by people and institutions around the world.

SEAN SANDERS: Yes. So her prediction of $1.48 million by 2030 – that’s the bullish stuff. The basis from ARC Invest is $258,000, far lower than $1.48 million. And then the bear case is $682,000. But even the bear case is still a significant return. The bull case will return 4,200% from where we stand right now, where we are roughly $22,000/23,000 odds a Bitcoin. So these are bold, bold predictions, but I’m a Bitcoin bull – not necessarily in the short term. It’s anyone’s guess what’s going to happen in the short term, but in the long term you see institutional adoption.

Just looking at the banking space – I don’t think everyone knows this – just three years ago you’d be fired from Standard Bank or at the very least you’d be spoken to if you talked about Bitcoin within banking. If you took a look at some sort of Investec, FNB, go through the list of the best banks in South Africa, Bitcoin was just a no-no. You just don’t talk about it.

Fast forward to today, not only do these banks have blockchain teams, but they also have cryptocurrency teams. We are actively engaging with many of these banks and they are interested in this area. So that kind of change in feeling is starting to happen. And the same happens in the institutional space.

Now 2022 was probably the year that caused many institutions to take a step back. You had the FTX debacle that occurred. The crypto brand was really beaten and it’s going to take quite a few years to rebuild trust with the public. But gone are the days where you have all the crypto companies saying, ‘Screw the banks. We will build this new economic future. There really seems to be much more of a symbiotic relationship emerging. So that’s really helping to drive the digital institutional use of this asset class, and that’s going to be one of the big drivers going forward.

The other thing is actually the technology tool behind blockchain and crypto. If you look at it, until now the utility in space has really been speculation. It has been treated like a big casino. But suddenly you start seeing real world assets put on blockchains and it interacts with the crypto world. It is very interesting. You see the fractionalization of stocks moving into blockchains, where you can buy a Tesla share or an Nvidia share directly on a blockchain without the need for some kind of central intermediary. It is truly remarkable.

There are a number of other services that take place. That’s the technological utility side of things. And then, of course, for those price targets to be met, you need the macro economy to actually start playing ball.

At some point, and probably in the next 12 months, you’re going to hit peak interest rates in the US and the EU more broadly. When that interest rate narrative changes, where we actually say, hey, this economy is slowing down, the labor market is breaking a little bit, all of a sudden interest rates start to come down, and that’s really good for the crypto space. And then you top it all off with the Bitcoin rally that has always preceded the halving events.

Of course, the future can always be different, but it is the Bitcoin halving that is happening in March next year. It is the biggest event that can happen in the crypto/Bitcoin space because suddenly you see the reward for mining Bitcoin is cut in half, which means the inflation rate of Bitcoin is cut in half. So, all things being equal, if demand equals supply – and obviously that’s how the price of crypto assets is determined – you have a lot less supply in the market you know, all else being equal, that should drive Bitcoin a bit higher.

SIMON BROWN: I look at the market cap – $450 billion, which is a big number. But compare that to a Microsoft, an Apple, a Tesla. In that sense, Bitcoin is still very much in its infancy.

We’ll leave it at that. Sean Sanders from Revix, I always appreciate the early morning insight.

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