Africa is rarely mentioned among the largest markets for cryptocurrencies. But it may be set to steal a march over other markets.
The surge in popularity of cryptocurrencies spurred the opening of at least 15 trading venues there within the past year alone. Peer-to-peer marketplaces also recorded a spike in trading volumes as bitcoin’s price skyrocketed last year. For example, trading volumes in Kenya on localbitcoins.com increased to $8.1 million in December 2017. Luno reported 2000 BTC worth of transactions in November 2017, when the cryptocurrency’s price was hovering in the $10,000 range. Approximately 37% of those transactions occurred in South Africa.
Recently, the continent’s oldest exchange disclosed lofty ambitions. Luno is a cryptocurrency exchange based in South Africa. It started operations in 2013 and boasts 1.5 million users spread across 40 countries. By 2025, it plans to reach 1 billion customers. For context, North America’s largest cryptocurrency exchange Coinbase reported 11.7 million users last year.
There are a couple of reasons why Africa might become the next big market for cryptocurrencies.
First, Several countries in the continent suffer from rampant inflation. For example, Zimbabwe and South Sudan both have runaway inflation rates.
With their paradigm of decentralization, cryptocurrencies offer an alternative to disastrous central bank policies. In fact, South Africa’s central bank recently announced a pilot test using ethereum’s blockchain for smart contracts. Second, the penetration of mobiles within the continent has helped its population become comfortable with cryptocurrency technology.
Finally, the threat of government regulation, which has roiled cryptocurrency markets recently, is currently fairly low in Africa.
But Africa is susceptible to the same pressures as other cryptocurrency markets. Cryptocurrency traders in Africa were paying a premium of as much as 40 percent in 2017 as bitcoin’s price reached new records. According to some reports, the premium occurred due to a shortage of liquidity. See more business stories and tips at Slaytition, by membership only