• Nigerians bet $ 398.5 million on two stock exchanges in one year
• Transactions increase by 50% since CBN restriction
• The plunge plunges more people into the financial crisis
• Deposit mobilization threatened as stablecoins gain popularity
A severe crisis could loom as a growing number of Nigerian youth turn to large-scale digital currency investing, despite a financial regulatory restriction imposed by the Central Bank of Nigeria (CBN) in February.
In February, the CBN banned financial institutions from processing transactions relating to decentralized digital currencies, otherwise known as cryptocurrencies, which number more than 4,000 in digital circulation.
The Guardian’s findings show that more young people, taking advantage of peer-to-peer opportunities, have embraced the relatively new investment window despite the ban. Even the recent crash that saw Bitcoin, the flagship asset, lose more than 50% of its price, has not deterred investors.
Bitcoin has traded between $ 28,000 and $ 38,000 in the past few weeks. At the height of the bull run, it fell to $ 68,800 before a sudden drop. But Bitcoin, which is considered gold in the crypto world, got lucky. Some pieces (as they are affectionately described by enthusiasts) have lost more than 70% of their price.
One coin, Shiba Inu, for example, hit $ 0.00005 after Binance listing saw it gain over 2000% in days, deflated to $ 0.0000087 at time of publication . Komodo also fell from an all-time high of $ 4.7 recorded in April to less than a dollar. At time of printing, it was trading at $ 0.6.
Nigerian new adopters, who threw away their savings in April when prices hit the ceiling, are now biting their fingers. The situation is worse for those who have played with borrowed funds even at one point, Elon Musk, founder of Telsa and biggest proponent of digital currencies, warned that it was “not wise to invest money savings. ‘a life’ in fashion.
The number and volume of Nigeria’s resources entering into trade has increased dramatically, the analysis suggested. Drug addicts, who disguise crypto-related transactions to evade bank sanctions, have continued to increase their holdings as new entrants, including housewives, are promised that the current crash is normal and momentary.
Data from Usefultulips.org, analyzes that track exchanges on LocalBitcoins and Paxful, found that the volume of transactions from Nigeria increased by about 50% between February, when the CBN waved its stick, and June.
The two major exchanges pooled a total of Nigerian $ 32.5 million compared to $ 21.9 million made in February and $ 18.4 million invested in January. In January 2016, the total investment channeled through the platforms was $ 6,035 million.
Nigeria is the largest market in sub-Saharan Africa in terms of growth and investment volume. His investment in LocalBitcoins and Paxful in the past year alone is $ 398.5 million. It is followed by Kenya with $ 144.5 million in investments.
Only Nigeria and South Africa have seen stable adoption growth since 2016, while the trend among other early African adopters such as Rwanda, Malawi, Angola and Tanzania is anemic.
Usefultulips.org’s estimate captures only Naira-denominated transactions, while Nigerians outside the country, who would be among the main drivers of investment, are obviously excluded. The Guardian has been told that more than 70 percent of young Nigerians in Malaysia, Ghana, South Africa and Europe are dependent investors.
In the past few days, a photo of a ‘wanted alive’ Nigerian who is believed to have disappeared with N28 million linked to crypto transactions from Malaysia has been trending on WhatsApp.
The numbers captured by the digital platform also exclude activity on Binance, the main exchange in terms of volume, and other Nigerians also frequented as they seek a quick fortune.
Binance was forced in March last year by Nigeria’s interest in launching P2P trading services for the naira, providing an open platform for users to trade cryptocurrencies using the currency without any fees from transaction on Binance.com and on the Binance mobile app. The naira became the first African fiat currency supported on the Binance P2P platform.
“We believe Africa is a blockchain continent. We no longer need to bank the unbanked. We can provide cryptocurrency financial services to them directly. Nigeria is a vibrant center of innovation with a great passion for cryptocurrencies, ”said Binance CEO Changpeng Zhao.
On CoinDesk TV’s First Mover show in June, Paxful CEO Ray Youssef said: Reflect the “big momentum” around cryptocurrency adoption. He concluded that Africa is leading the global adoption of cryptocurrency.
As the next testimonial session lingers for first-time adopters, thousands of Nigerians are now paying the price for the greed and emotion that rules crypto investing. The Guardian was put in confidence by a trader who had invested 1.5 million naira for a family project without her husband’s knowledge.
“I bought a few pieces, a neighbor told me they had enormous potential. I bought it in April when the prices were really high, but he assured me that they would appreciate it sooner than expected and that I would double the amount before July (this month) when I need it. . I will be extremely lucky if I make 30 percent of the investment if I liquidate it today. I don’t know what to do, ”she said.
This is because many new investors do not know what to do with the deflated investment. But experts warn – “Hold on, don’t sell and if you’ve got the money set aside, buy the dips.” Buying the dip means not panicking but expanding your portfolio while others empty their assets for fear of more losses. But no expert knows when the current crash will bottom out, so those buying the lows a month ago suddenly realized that they were buying at a higher price.
JP Morgan and other investment banks, who have tried to predict the next market move, do so with the greatest probability. A few days ago, JP Morgan predicted that the market came out of the bearish mood when Bitcoin regains its share of over 50% of the total market.
Investment experts have called the ongoing collapse in coin values a “big deal.” Recently, Bitcoin assets have experienced a statistical pattern technically described as a death cross as opposed to a golden cross. Death cross, in the investment market, refers to a rare downtrend when an asset’s 50-day moving average (MA) crosses its 200-day MA. Significant cross-death events in other markets include the Wall Street Crash of 1929 and the Financial Crisis of 2008.
But experts have differed widely, holding binary positions on the meaning of the death cross at the present time. Some see it as a blip, a kind of price correction that will mark the start of a new rally to a new high while others think it is the start of a long downtrend.
This is not the first time that assets have suffered huge losses shaking the market. Amid the fear of COVID-19 last year, Bitcoin lost 61%. In 2018, it lost 84% and 30% in November 2017, while 40% had been wiped out two months earlier. As early as January 2012, when the asset was a few dollars, it lost 43%.
Between that date and 2017, it lost at least 80% on several occasions due to massive dumping which was only followed by a new high. The strength to stand up after his fall has been a source of consolation for those who have lost hard-earned resources due to the pumping and dumping of Musk’s entry into the market.
For Nigerian “gurus”, the USDT, a stable currency at par with the dollar, has become an ally. They buy crypto assets when they think the market is going down and convert to stablecoins when they feel it’s going to plunge again, which has become a common occurrence, said investor Chima Okereke.
The survey also suggested that many young people, who have lost confidence in the future of the naira, inflate their portfolios in USDT as an alternative window of savings to the naira. This culture that is developing very rapidly with the middle class also enrolling in crypto exchanges for purposes (savings) may threaten the country’s ability to mobilize savings for medium and long term investment. Stable currencies do not fall or appreciate on trade.
Professor Ken Ife, consultant to ECOWAS and other multinational organizations, said young Nigerians are exploring alternative investments due to the challenge of the economy.
He admitted that banks would suffer from the drain of resources, but observed that the entire economy would benefit as investors made more money and liquidated their assets to spend them.
“I’m not worried about the trend because they won’t continue if they don’t make money. At some point, the returns on the investment would be repatriated to the country to be spent, ”noted Ife.
Bitcoin is still banned in Nigeria. However, the CBN has since announced its intention to launch a digital currency soon.