Instability stemming from an apparent coup could send the bitcoin price even higher in Zimbabwe.
On Wednesday, Zimbabwe’s military initiated an apparent coup against President Robert Mugabe, the authoritarian leader who has ruled the country for nearly 40 years. Although the military denies it is attempting to overthrow the regime, the 93-year-old president has reportedly been taken into custody, throwing the country’s political future into turmoil.
During times of crisis, people often turn to hard assets such as gold to preserve their wealth. Recently, bitcoin and other cryptocurrencies have begun to eat into gold’s market share, and it would not be surprising if this coup leads more Zimbabweans into the country’s nascent bitcoin markets.
As CCN.com has reported, the bitcoin price already trades at an astronomical premium in Zimbabwe, primarily due to an extreme cash shortage and tight capital controls implemented to keep physical currency within the country. Although the country nominally uses the U.S. dollar as its official currency, the lack of physical dollars caused the government to print bond notes supposedly pegged to dollars at a one-to-one ratio.
However, it’s an open secret that the government has been inflating the “zollar” supply at a pace far above the official, dollar-denominated rate of 0.38%. Consequently, Reuters reports that residents have been pouring their money into any value-retaining asset they can find — including bitcoin.
“There is inflation setting in in Zimbabwe and bitcoin is an interesting store of value,” Taurai Chinyamakobvu, a tech and blockchain expert in the country, told CCN.com in a recent interview.
While assets such as vehicles and real estate may serve as reliable stores of value, bitcoin affords Zimbabweans the ability to make cross-border purchases. Moreover, after living in a country whose currency was once so hyperinflated that the central bank printed 100 trillion dollar notes, residents appreciate bitcoin’s lack of central governance.
“There is no owner or controlling body for bitcoin. Every transaction done online is visible to all traders in bitcoin,” Pardon Gatsi, a tech expert based in Harare, the capital city of Zimbabwe, told CCN.com.
This increased interest in bitcoin — along with the inflation of the zollar — has caused the bitcoin price to surge as high as $13,900 on Harare-based bitcoin exchange Golix. At present, the exchange prices bitcoin at $13,350 — a full $6,100 above the global average.
If the apparent coup destabilizes the country, the bitcoin price could rise even higher in Zimbabwe. Conversely, if the new regime adopts a less-inflationary monetary policy, it would not be surprising to see the bitcoin price fall closer to the global average.
Last modified: May 20, 2020 9:48 PM UTC