Bitcoin is currently cruising past the $ 40,000 mark, at its highest valuation to date. This development comes at a unique time in recent history, characterized by the global pandemic, geopolitical shifts, ambiguity in the financial markets and increased digital transformation. Investors naturally interpret correlation, hoping to define the bullish crypto market and gauge the direction it is headed.
For an insider’s view, Business & Technology Review spoke to Khurram Shroff, Chairman of the IBC Group in Dubai and one of the region’s largest “HODLers”, with an estimated one million Bitcoins. Khurram’s connection to Bitcoin, the original cryptocurrency, dates back to 2009 when it was trading for just $ 0.0008 a penny, following the 2008 recession and the housing market crash. In the years since, Bitcoin, which was once a relatively underground phenomenon, has gone through many unusual things. Finally, it has lived under the spotlight in world markets. So what better time than now, to ask one of the region’s largest crypto players what it makes of the rise of Bitcoin and other cryptocurrencies? And what does he think the future holds for this ‘digital gold’?
Can you give us a discount on Bitcoin’s current bull run? Does he have a relapse risk?
Bitcoin has been witnessing its fair share of bad and bad things since 2010. But for crypto nighters like me, who saw the big picture, the current bull run is not surprising in the least. Bitcoin’s meteoric rise is largely due to its inherent characteristics. Creator Satoshi Nakamoto designed it to mimic gold by indulging in artificial scarcity. But unlike gold, which continues to be mined at an average of 2,750 tonnes a year, Bitcoin supply was capped at 21 million. Thus, it became an asset with supply constraints and, by design, deflationary. Nakamoto hit the Blockchain hard with a halving event, which reduces the prize by a block by half, every four years. There have been three such events so far, the last one in May 2020.
In my experience, the 18-month period following the event will halve bullishly. For example, the halving event in 2016 paved the way for a Bitcoin bull run in 2017. Therefore, it is reasonable to expect this to happen again in 2021. However, in contrast to a slightly induced 2017 run extensive by retail interest, the current bull run. driven by various market forces. This is why I am not expecting a relapse.
What do you mean by the various market forces, and how do they affect the crypto market?
The pandemic and its knock-on effect on the economy encouraged institutional investors to take refuge in hedge instruments that can store value through inflation. As central banks increased the money supply to encourage public spending and aid recovery, government and institutional debt continued to rise and fiat currency has been feeling the pressure ever since. This created a sense of urgency among traditional investors, who turned to hedges. In fact, this explains why the bullion markets also saw significant gains in recent months. Gold and silver have historically been hedge instruments. But institutional investors saw gold-esque benefits, along with some additional unique advantages in the crypto market, which saw the proliferation of Bitcoin, Ethereum and other cryptocurrencies.
How can Bitcoin disrupt traditional, refined asset class like gold and other precious metals?
Gold’s reputation depends on its scarcity and public consensus over its appreciation. Bitcoin is not only scarce, but it is stable, highly portable and shareable. And the distributed consensus algorithms in the Blockchain ensure the highest level of transparency. Such additional benefits have prompted alleged market players to sell their gold exchange trading funds for poles in cryptocurrencies in recent weeks. Deficits in the bullion markets, including the lack of transparency, have a negative impact on their viability in the digital economy. On the other hand, cryptocurrencies can be traded using handheld devices, in the comfort of your own home. In time, I would not be surprised if Bitcoin replaces gold as the most popular hedge tool and asset class.
If cryptocurrencies are ready to replace bullion, how will it affect market capitalization?
As it stands, the world’s gold supply is priced at around $ 9 trillion. So, mathematically speaking, if Bitcoin were the equivalent of gold, each coin will have to rise to $ 500,000, or up 15 times its current valuation. The equivalent estimate for Ethereum, the second largest cryptocurrency by market capitalization, would be around $ 75,000 per ether. Considering that the entire crypto market had only nominal value 10 years ago, it is not far to make such projections. It might take a year, or five, or even 10, but I think it will get there, sooner or later.
Can you substantiate your claims through examples of organizational interest?
Bitcoin has had a promising run since its first appearance in Wall Street in 2017. But it was only until S&P Dow Jones Indices announced the emergence of cryptocurrency indexes this year that institutional interest spiked. Along with this were Citi and JP Morgan changing their dubious stance and Paypal facilitating crypto transactions. Grayscale, one of the largest hedge funds in the US, currently holds over 2.6 percent of the circulating Bitcoin supply and 2 percent of the circulating ether supply.
The number of U.S. financial advisers who made allocations in crypto doubled in 2020. And even old-school billionaire investors like Stan Druckenmiller and Paul Tudor Jones bought into the crypto wave. This was made possible by the US Government’s favorable policies towards mainstream crypto adoption, despite early reservations. Such reporting signals emerging from the US are often the early indicators of how global capital will be used in the near future. And a few dollar-pegged economies, especially the UAE, have identified these signals and devised a favorable regulatory framework for crypto transactions.
How do you see the evolution of the UAE crypto market? Will it align with the nation’s larger goals?
Cryptocurrencies provide a secure framework, an anti-fool transaction mechanism and keep a digital ledger that can be verified. The UAE leadership, known for its innovative innovation-driven governance, has embraced Blockchain in a big way. As part of the Blockchain Emirates Strategy 2021, the UAE is adopting cryptographic technologies, open source, and on track to move 50 percent of its transactions to Blockchain soon.
Blockchain, with inherent transparency and reliability, is conducive to people-centered governance and financial democratization. These strengths will play a pivotal role in accelerating the UAE’s transition to a knowledge-based economy. Going forward, Blockchain policies of apex bodies like ADGM and DFSA will be vital enablers of growth.
With road vaccines and signs of economic revival, where do you think Bitcoin and other cryptocurrencies will stand as asset classes?
Institutional interest and inflationary pressures will continue to drive the demand for cryptocurrencies. Once the situation caused by a pandemic diminishes and economic headwinds subside, crypto valuation and adoption will be determined by the fundamentals of the market. Investors will tend toward liquid markets, which tend to be smoother and easier to exit. Unlike precious metals, which can be liquid and illiquid under different circumstances, Bitcoin is essentially a multifunctional liquid asset, which can act as a store or a value and a medium of exchange. Such unique capabilities will continue to function as a vibrant force, keeping the crypto market better. My optimism also stems from the ability of cryptocurrencies to adapt to the evolving needs of the contemporary world, confirmed by recent developments in Ethereum 2.0.
How does Ethereum 2.0 fit within the post-pandemic pattern?
The new post-pandemic norm is characterized by a renewed focus on sustainability and eco-centric practices. This is in contrast to the traditional Proof of Work mining model of Blockchain, which is energy intensive. To address this, Ethereum creator Vitalik Buterin has devised an energy-efficient Test-Stake model for Ethereum 2.0, which does not require large server farms, making it more eco-friendly and sustainable. That’s why I became actively involved in the launch of Ethereum 2.0, and invested $ 10 million (about 20,000 ether bets) through my IBC Group, helping the beacon chain for the launch go live. And true to my belief, more than $ 2.5 billion dollars – or 2.2 million Ether – is stacked on an Ethereum 2.0 deposit contract, right now.
How would IBC Group like to position itself in the larger crypto market? Anything you are willing to share.
IBC Group is one of the earliest bidders of cryptocurrencies, and will continue to scale its footprint in the crypto market. We are invested in everything the market has to offer, and we currently have over 4,000 different cryptocurrencies, which is testament to our continued belief in its future. I would go so far as to say that we have a spray-and-pray attitude towards cryptocurrencies.
Thanks to the current bull run, about 300 IBC Group original members, from 190 countries, retired on January 7, 2021 with a few millions each, after exchanging for their Bitcoin holdings. This is a proud moment for our investors, employees and partners. And as the Founder, I can’t ask for more.
The Khurram Shroff
Khurram Shroff Arab, whose IBC group holds more than a million Bitcoin, has been a keen promoter of Blockchain and was also instrumental in the recent launch of Ethereum 2.0, through a $ 10 million investment (about 20,000 Ether bets). Khurram is an award-winning global banking and finance leader, featured in the prestigious Power100 list of “Top 100 Most Powerful and Influential Muslims in Great Britain and the World”. He is Chairman of IBC Group, a UAE-based Global Real Estate and Tech investment firm, as well as Chairman of Oriel Suites, which focuses on inspiring living with bespoke art collections in vacation home properties throughout the Middle East and Asia. .