Bitcoin in Africa: 4 reasons for success: Image: Pixabay

Bitcoin in Africa: 4 reasons for success

Cryptocurrency has experienced a real boom since the beginning of the Corona crisis, albeit with numerous setbacks.


Bitcoin in Africa: 4 reasons for success: Image: Pixabay

Such ups and downs are nothing unusual for Bitcoin. This is because cryptocurrency has been used primarily as an object of speculation. That means: Many people only buy crypto because they hope they can sell it profitably later. So if the price of the digital currency rises sharply, as it did multiple times, many investors see it as an opportunity. But unfortunately, many investors then often decide at the same time to resell their coins, and a price collapse follows.

However, cryptocurrency fans assume that bitcoins will be used more and more as a standard means of payment in the future. If they have their way, digital money should even become a real alternative to cash. From the point of view of many countries, that still sounds pretty abstract at the moment. After all, it is almost impossible in such countries, with a few exceptions, to pay with Bitcoin in everyday life. However, a look at Africa shows that such scenarios are entirely conceivable; paying with Bitcoin is already much more typical in some African countries.

Bitcoin in Africa: South Africa and Nigeria lead the way

For example, 11.3 percent own cryptocurrencies or engage in crypto trading in South Africa. In Nigeria, 33.4 million Nigerians own crypto. The spread of bitcoins is, therefore, one of the highest in the world. And according to a recent report by crypto exchange Luno, in partnership with Arcane Research, “Africa is one of, if not the, most promising region for cryptocurrency adoption.” This is due to a unique combination of economic and demographic trends.

African overview-Ownership of Cryptocurrency: Image: Luna, Chain analysis

4 reasons for Bitcoin success in Africa

Specifically, the success of Bitcoin & Co. in African countries has four reasons:

1. Fear of inflation

Central banks around the world are issuing a lot of new money during the corona crisis. Therefore, some people are afraid of inflation. So they fear that traditional currencies will lose value. Thus, inflation fears are much more acute in African countries with unstable currencies.

Many locals are therefore looking for ways to invest their money safely. They then typically buy gold, for example. However, Bitcoin fans also consider cryptocurrency to be a good alternative. The maximum number of bitcoins that can be created is limited to 21 million by software code. The number of bitcoins is kept almost artificially low. This should ensure that the demand for Bitcoins remains greater than the supply in the long term and that the currency does not lose value.

In practice, of course, this only works as long as there is a fundamental demand for bitcoins. On the other hand, if investors lose confidence in the cryptocurrency, the currency’s exchange rate can still fall rapidly within a short period, as has often happened in the past.

2. Lack of ATMs

Having access to your cash is very important. In developed countries, you simply go to the nearest ATM or get it at the supermarket checkout. However, in most African countries, it is not so easy. Most ATMs are not working correctly or not working at all. And in very remote areas, there are sometimes no machines at all.

In addition, many people in Africa do not have a traditional bank account. At the same time, people have significantly more experience with digital payment solutions.

3. Lots of international transfers

Expats and migrants from sub-Saharan transfer large amounts of money to their home countries. Figures from the World Bank show that. However, banks often charge high fees for such international transfers. Transaction fees also apply to transfers via Bitcoin. The money goes to so-called “miners” – i.e., people who maintain the digital infrastructure for trading Bitcoin. Compared to conventional international transfers, however, the fees are often lower.

More and more expatriates and migrants are apparently switching to cryptocurrencies for their return transfers. This is shown by figures from the data analysis company Chainalysis.

4. A young, digitally savvy population

On average, the population in African countries is significantly younger than in Europe. And surveys show that young people tend to be more open to cryptocurrencies. Moreover, on average, people in Africa are also considered tech-savvy. As a result, the fear of using cryptocurrencies such as Bitcoin seems less widespread there.