South African Cryptocurrency Debts

Although many think that cryptocurrency may be the way to solve African debt and investment problems, there seems to be scant evidence that this is happening.  Like most areas of the world, the crypto craze looks to have little real world benefits. Sure some people are making huge profits betting on the enormous swings of Bitcoin and it’s rivals, but this is of little help to real world issues.

Certain African countries seem to be really keen on the new cryptocurrencies predictably Nigeria and South Africa where there’s intensive trading and speculation on both formal and informal trading networks.  Indeed in South Africa, there are many reports of people getting into financial trouble betting on the wild swings of various cryptocurrencies.

Much like the day trading crazes of the 1990’s, buying and selling these currencies in the short term is extremely risk but of course can be incredibly lucrative.  Many are investing money from second mortgages and credit card debt hoping to profit from the boom in prices.  Of course, the volatility goes both ways with Bitcoin trading in a range of around $8000 – $20000 in just a few weeks. Any of these currencies can easily rise or fall by over 30% in a single day and possibly much more than that.  One individual in cape Town was reported as selling his car just to invest in the cryptocurrency Ethereum after getting a tip on it’s imminent rise.

For ever investor who is losing money on investments in crypto speculation  there are a couple who have simply been scammed.  There are numerous Ponzi and MLM schemes operating in the African continent which supposedly invest in cryptocurrencies.  The schemes offer guaranteed returns and also referral schemes designed to draw in more victims. It should be noted that if there’s one thing for certain with regards investing in bitcoin or similar that’s uncertainty is guaranteed.  There is no way anyone can predict the long term prices of bitcoin as it doesn’t have any underlying value. Bitcoin is always going to be extremely volatile and as such no scheme could ever guarantee anything at all.

South Africans are not the only Africans embracing Bitcoin however, as a recent report from Citibank has indicated. Apparently Kenya, are the fifth highest bitcoin holders in the world just behind Nigeria.  There’s certainly a real appetite for investing in the digital currency on the African continent.

How important is this? Well the countries like Kenya who are investing large proportions of their private wealth in cryptocurrency are obviously very vulnerable to a collapse in prices.  What’s worse is that every cent invested in this digital world is not invested in traditional projects in the country.  More developed countries would cope with this investment drain better than most African nations.

Most financial institutions are very positive about blockchain the technology behind the currencies so this could have a beneficial effect in the long term on African economies.  The hype on cryptocurrencies however rises daily, you can see lots of reports and coverage on mainstream media – try watching UK TV abroad for some insight in their financial sections.

Much will depend on how cryptocurrencies fair in the long term, it may be that they turn out to be a valuable wealth generation tools.  African’s perhaps see these currencies as a way of investing in Western economies in a simple way.What is certain is that Africa’s economic success will be much more certain if the world of the cryptocurrency develops further in the coming years.

Steven (BBC News) Baker

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