This week bitcoin surpassed $19,000 on global exchanges, with the exception of one continent – Africa. Customers of the world’s second largest and second most populous continent were already paying that much per coin back in November. Prices at Africa’s Golix.com exchange have been 40% higher than the rest of the word for months. Now news.Bitcoin.com can reveal why.
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Africa is Illiquid
On November 15, it was revealed that Zimbabweans were paying $13,500 for bitcoin, a sum that was described at the time as “eye-watering”. Last month’s expensive bitcoin is this month’s cheap bitcoin, and the intense demand for the digital currency has since pushed it to over $19,000 globally as of this writing. The premium that’s been in place at the continent’s Golix exchange remains in place though. As a consequence, one bitcoin there is currently trading for around $32,000, down slightly from a peak of $34,000.
“Who’s talking about us?” runs a banner on the homepage of Golix alongside logos for media organizations that include CNN, CNBC, Reuters, and news.Bitcoin.com. Everyone in bitcoin is talking about Golix and they’re all asking the same question – why? Why is it so expensive to acquire the virtual currency in Africa? The answer comes from a recent blog post on Golix which outlines the factors that have contributed to the premium price.
Digital Scarcity in a Land of Poverty
Bitcoin has always traded higher in nations such as Zimbabwe, South Africa, and Nigeria apparently, but previously only by around 10%. One reason why buyers will pay over the odds for their cryptocurrency in Africa is due to a lack of liquidity. When there’s a shortage of sellers, it’s easy for players to set higher prices in the knowledge that their orders will still be filled. In countries such as Nigeria and Angola, this has forced buyers to pay as much as a 100% markup for bitcoin.
With demand outstripping supply, exacerbated by the failings of hyperinflationary fiat currencies, overpriced bitcoin is still seen as a better deal. Any port in a storm and any price to obtain a deflationary currency that will hold its value and then some. There’s another reason why bitcoin is so expensive in Africa though, which the Golix blog only references in passing – power.
Africa Has a Power Vacuum
Africa is one of the worst places in the world to mine bitcoin. It’s hot, dusty, and suffers from poor infrastructure. Power blackouts are a daily occurrence in many parts of the continent, making Africa wholly unsuited to mining. In South Africa, utility companies regularly engage in “load shedding” – imposing national blackouts to ease the demand on the electricity grid. As an NYT report from 2015 notes: “All of sub-Saharan Africa’s power generating capacity is less than South Korea’s, and a quarter of it is unproductive at any given moment because of the continent’s aging infrastructure.”
In Nigeria, meanwhile, the national power supply is so patchy that most of the country runs on private generators. On other continents, cryptocurrency mining ensures a steady supply of coins moving onto exchanges as miners seek to pay their bills and cash in their profits. In their absence, virtually no one in Africa is selling bitcoin. Power issues aside, the continent’s internet is also poor, with most Africans reliant on mobile data. Finding a stable source of power and internet with which to mine cryptocurrency is nigh impossible.
Bitcoin might be unsuitable for mining and priced at a premium, but Africans have at least one other means of getting their hands on cryptocurrency – by earning it. It’s a slow accumulation strategy, but one in which they are at less of a disadvantage. From Steemit to the bitcoin cash-friendly Yours.org, there are plenty of sites that will remunerate contributors in crypto. The process requires hard work and perseverance, but Africans aren’t afraid to graft. Given the financial stability and possible route out of poverty afforded by cryptocurrency, it’s no wonder Africa has developed a taste for bitcoin.
Would you still buy bitcoin if you had to pay a 40% premium for the privilege? Let us know in the comments section below.
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