By John Ikani
For many, it is a bad – if not the worst – time to be in crypto as indicators paint a gloomy future for an already bearish market.
To begin with, the flagship cryptocurrency asset – Bitcoin is at the time of writing, trading at $21,400, its lowest level in over three weeks.
On a macro scale, Bitcoin is 68.96% down from an all time high of $69,044. As it typically happens when there’s extreme volatility with bitcoin, the alternative coins tend to go a step further.
Somewhat expectedly, the Fear and Greed Index has returned to a state of fear.
More damning indices
The state of the fear and greed index is not unconnected to a foreseen exit of money from the crypto market.
No thanks to the Russian-Ukraine conflict, Moscow has severely reduced and outright halted gas flows to many European countries.
As a result, Europeans are seeing an increase in energy bills despite grid overloads, energy rationing and blackouts.
With winter fast approaching, experts project that there will be more spikes in energy prices which – among other economic downturns – reduces exposure to speculative digital assets.
In the US, feds are still fighting a half-century high inflation with analysts suggesting that the world’s biggest economy might be in an unofficial recession.
In Africa, crypto stands tall
Economies in Africa had only begun to recover from the shock of Covid-19 when Russia’s full-scale invasion of Ukraine jeopardised their progress.
According to IMF’s most recent growth forecast for sub-Saharan Africa, growth is expected to weaken in the continent which is having its fair share of skyrocketing inflation.
In spite of the Economic downturn, Africans are increasingly seeking refuge in crypto which they consider a safer bet.
In fact, a policy brief recently released recently by UNCTAD, a United Nations agency. Significant proportions of Kenya (8.5%), South Africa (7.1%) and Nigeria’s (6.3%) populations are using these digital currencies. In June, the Central African Republic adopted bitcoin as a legal tender.
The digital assets promise to address both financial exclusion and the problem of weak domestic currencies.
In other words, everyone with access to a mobile device and internet connectivity can leverage crypto to make/receive payments, send remittances, and invest in easier, quicker, cheaper, more secure, and transparent ways than conventional methods.
Crypto also provides the opportunity to hold assets that aren’t affected by rising inflation and depreciating domestic currencies.
No tax, no problem
The UN, recently lent its voice to calls made by other global financial institutions for the regulation of cryptocurrency.
The call was not unconnected to tax-free playing ground which has increased Africans’ exposure to crypto.
Balances presently kept in crypto wallets are untaxed, and African countries don’t have tax regulations on digital currencies, enabling owners to evade and avoid tax payments.
However, if cryptocurrencies are to live up to their promise, both on the African continent and elsewhere, there must be a globally coordinated and holistic approach to regulation.
Even with regulation, Crypto is expected to continue to attract Africans, many of whom have lost faith in the ability of central banks to steer their economies to a path of growth as stagnation, compounded by debt crises and political instability continues to plague the continent.
