Zimbabwe’s worsening economic conditions have seen the citizens of the Southern Africa republic turn to Bitcoin leading to them paying a premium price on over-the-country crypto trading platform LocalBitcoins.
Currently, there are sellers on the OTC crypto trading platform asking for $104,000 per Bitcoin. With the Bitcoin price hovering below $10,000, it means they are charging a premium of nearly 1,000 percent.
The Bitcoin price premium is coming weeks after the Zimbabwean government reinstated the Zim dollar. At the same time the government also banned the use of foreign currencies in the settlement of domestic transactions.
Earlier this month, after another huge Bitcoin price premium in Zimbabwe had been observed, eToro markets analyst Mati Greenspan argued that the high price was due to the locals trying to get rid of their U.S. dollar holdings after the government reintroduced the Zim dollar. At the time the Bitcoin price premium was observable among sellers who were being paid in the country’s mobile phone payments app EcoCash.
However, this time round premiums are also being observed among sellers seeking to be paid in global payment platforms such as PayPal and Western Union.
The high Bitcoin price premium can be attributed not only to the high demand occasioned by the country’s dire economic conditions but also the fact that Zimbabwe currently lacks local cryptocurrency exchanges.
Last year in the first quarter the Reserve Bank of Zimbabwe prohibited banks and other financial institutions from offering their services to cryptocurrency exchanges and traders. This ban has seen Zimbabweans trading Bitcoin on OTC markets having to bypass local banks and turning to foreign payment services providers.
Some of the cryptocurrency exchanges that operated in Zimbabwe before the ban have since then turned their focus on other markets. Golix, for example, took the ban as an opportunity to launch operations in other African countries such as South Africa, Nigeria, Kenya, Tanzania, Uganda, Cameroon and Rwanda.
The 1,000 percent premium on Bitcoin price coincides with official data in Zimbabwe indicating that the annual inflation rate in the country reached 175 percent last month. This made Zimbabwe’s inflation rate the globe’s second-highest after Venezuela. Per the Zimbabwe National Statistical Agency, this was nearly double the inflation rate recorded the month prior:
The year-on-year inflation rate for the month of June 2019 as measured by the all items consumer price index stood at 175.66 percent while that of May 2019 was 97.85 percent.
The triple-digit inflation rate was recorded just weeks after Southern Africa country reintroduced the Zimbabwean dollar which had been dropped in 2009. Interestingly, this was the year that Bitcoin was launched. Fears are now growing that the reinstatement of the Zim dollar will lead to hyperinflation.
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Last modified: June 23, 2020 2:45 PM UTC