Africa Blockchain Cryptocurrency Currency Development Finance Fintech Opinion

Opinion: The importance of cryptocurrencies for Africa

With the current surge in Bitcoin prices, sellers and holders are struggling to find the perfect break in the market to sell their Bitcoin in order to guarantee the best possible profit. According to Coinbase’s trading portfolio, Bitcoin passed the $10k USD mark on Oct. 26, but failed to maintain the price for more than a couple of hours. As of Oct. 24, the prices were stable between $9.5k and $9k USD.

Cryptocurrencies were first introduced to the world after the market crash in 2008 but, for the most part, were only used and invested upon by few that saw these new technologies as a future promise. Almost 10 years later, investors have gained thousands, if not millions, in profits from their investments. But the implementation of these currencies in our modern world would not be plausible if not for a big market crash or a huge failure in the banking systems. This statement might be true for developed and stable economies like most in the “West”.

It comes as a very big advantage for the emerging and developing world, with technologies being easily implemented to the foundation of these emerging economies. We can observe this with the implementation of Fintech in Sub-Saharan Africa. For instance, payments can be made to or from individuals with a simple text message. Services like this are being used by millions of people in countries like Nigeria, Angola, Zimbabwe and Mozambique. The major population of these countries utilise cryptocurrencies every day for simple things, like buying a snack or a soda, to more sophisticated actions, like paying for commodities and making fairly large monetary transactions. Even though the Fintech market is growing, the transactions are mostly limited to a single country or the same carrier operator, while Bitcoin, for example, can be transferred to another wallet almost instantaneously to any individual across the entire world.

To make transactions and to purchase a cryptocurrency, the individual must buy the currency through a currency wallet. To purchase the currency, you must find a wallet that allows transactions in your country. There are dozens of websites and apps that already accept the purchase from African countries.

During last year’s SingularityU South Africa Summit, the former CEO of Google Africa, Stafford Masie, spoke about the importance of cryptocurrencies (Bitcoin, more specifically). He mentioned emerging economies, but because of the context of the summit and where it took place, we can assume Mr Masie referred mainly to Africa: “The third economy is an economy where people don’t have access to electronic forms of distributing value or cash […] Think of the people who live two hours outside Shanghai, China’s central coast. They will use Bitcoin to trade and unlock international transactions outside of the existing frameworks in a manner that you and I cannot imagine”. The usage of cryptocurrencies, as said by Mr Masie, is very important to individuals that live far from the main region of countries, and can be very important in countries where transportation is difficult and cities/villages are somewhat isolated from one another.

At the end of October, just a few weeks ago, Bitcoin saw a huge surge in its price. With this huge surge came a large number of speculations regarding the stability of the new price and whether or not it represents a market equilibrium. It turns out that contrary to what many people believe was the result of a huge Chinese investment in Blockchain technology was, actually, nothing but a hoax. Indeed, China invested millions in Blockchain technology, but the cause of the price increase was much more of a customer response to China’s investment. The fear of another cryptocurrency market collapse led to an increase in over 1000% the quantity and number of transactions made during the 23-24 of October. A drop of a few percent may be inevitable but, considering the elasticity of Bitcoin, investors need to be aware of the risks while trading large amounts.

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