Bitcoin in Zimbabwe is more expensive than elsewhere in the world. It is trading at $13000. Reason for the spike is simple, the country is in meltdown, and President Mugabe is out of office. Demand for a store of value amidst chaos drove the coin to new levels. Bitcoin flourishes in times of conflict. Be it regulatory, market-based, or military. When the world is at war, bitcoin becomes a safe haven. For Zimbabweans, bitcoin more than a store of value, it is a lifeline.
Although the country is enjoying a stable macro-environment, liquidity constraints weigh down economic activity. Getting money out of Zimbabwe has been a challenge. Banks and financial institutions have put in place restrictions capping the amount one can transact. Others even ask customers to pre-fund their account with US dollars.
Disclaimer: This is a guest post and may not reflect the views of Bitcoin Hub.
In Zimbabwe, as a net importer, there is a need for physical cash to restock supplies. To find it, businesses are turning to the ever-diminishing black market to stay afloat. The situation got even worse when banks announced that they wouldn’t issue forex to non-exporters. Adding to the demand is individuals who want to meet basic needs and students looking to pay for education. These extreme measures force businesses and individuals to use alternative means to cater to the needs.
Although not all the merchants deal in cryptocurrency as a mean of payment, most believe that cryptocurrencies have made it easier to move money out of the country. Because of this peoples are finding a way to Buy Bitcoin and pay for goods and services. The cryptocurrency community in Zimbabwe is small but nonetheless vibrant. However, a growing no people are using cryptocurrency as a saving tool. As money is losing power people want to invest in something in which they can store value.
The idea of the majority is Bitcoin act as a guard against inflation. Hyperinflation paralyzed the country’s economy. Therefore, Bitcoins are a reassurance for many Zimbabweans. Paying $13000 for one bitcoin seems madness. However, Zimbabweans are not new to such high markups – US Dollar, and South African rand trade at twice the normal price. Therefore, bitcoin price is within normal parameters. In a country where bond notes are traded on the black market, bitcoin- even with 100% markup – is still a safer option.
The good thing is that Bitcoin is divisible to eight decimal place, allowing investment in small units of the digital currency. As of now, there is no cryptocurrency mining in Zimbabwe. This is due to the high cost of infrastructure and electricity as well a gap in knowledge in cryptocurrencies. The per unit cost of electricity is very expensive that’s why Bitcoin mining is an expensive process their but now, Zimbabwe has three underdeveloped power projects. Their development could lower the cost of electricity and ease conditions for cryptocurrency mining.
With the new government, there are expectations for better economic policies. This could potentially lower the demand for bitcoin and its price in the country. Another possibility is the government banning the use of bitcoins to enforce the use of the bond notes. Although Bitcoin and altcoins are decentralized, the government can lock out bitcoin exchanges.