Zimbabwe’s Deteriorating Economic Situation Sees the Country’s Citizens Seeking Refuge in Bitcoin
Hyper-Inflation Sees Bitcoin Price Surpass 1000% In Premium. The deteriorating economic situation in Zimbabwe has seen the country’s citizens seeking refuge in Bitcoin leading them to pay an insane premium on over-the-country crypto trading platform LocalBitcoins, CCN reports.
At the moment there are traders in LocalBitcoins platform selling 1 Bitcoin at $104,000. As Bitcoin’s is currently trading at around $10,000, this means that these sellers are gaining a premium of about 1000%. The high premium can be observed in LocalBitcoins.
The Return of Zim Dollar
The high premium comes just days after the Zimbabwean ministry of finance brought back the Zim dollar and also announced that foreign currencies will not be used in domestic transactions.
At the start of this month, another insane Bitcoin price premium was observed. At the time, eToro market analyst Mati Greenspan explained that the huge price was a result of the locals rushing to offload their US dollar holdings following the reintroduction of the Zim dollar by the government.
During this observation, Greenspan claimed that the high premium was prevalent among sellers who sought to be paid through the local payment system EcoCash. Greenspan tweeted:
However, an analysis of the current premiums indicates that there are sellers seeking to be paid using global payment systems like Paypal as well as Western Union.
Lack of Local Crypto Exchanges Aggravating the Problem
The huge Bitcoin price premiums cannot only be attributed to the increased demand brought by deteriorating economic situation in the country but also to lack of local crypto exchange platforms.
Early last year, the country’s central bank banned the local banks and other financial institutions from providing banking services to crypto exchange platforms and crypto traders. This has led to zimbabweans trading Bitcoin in LocalBitcoins market using foreign and phone payments services to bypass the local banks.
The ban also saw other local-based crypto trading platforms run to other crypto friendly countries. For instance, Golix closed its operations in Zimbabwe and started operations in other countries like South Africa, Nigeria, Kenya, Tanzania, Uganda, Cameroon and Rwanda.
The high Bitcoin price premiums in the country comes at a time when the annual inflation rates data was released indicating that Zimbabwe's inflation rate for the month of June stood at 175 percent. This officially made Zimbabwe’s inflation rate the second highest in the world after Venezuela.
According to Zimbabwe National Statistical Agency, the inflation rate for the month of June was almost double the rate recorded in May:
“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 high inflation rate was recorded just days after the country brought back the Zim dollar which had been abandoned in 2009, the year that Bitcoin was introduced in the world. Following the reinstatement of Zim dollar, there are growing concerns and fears that a hyperinflation may creep back soon.
Should Zimbabwe adopt the use of Bitcoin and other cryptos to counter the high inflation rate? Share with us in the comments section.