Is Africa The Next Big Market For Cryptocurrencies?

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Is Africa The Next Big Market For Cryptocurrencies?

Africa is seldom considered as one of the major cryptocurrency markets. However, it may be on track to outperform other markets. (See also: Africa’s Rise.)

The rise in popularity of cryptocurrencies has resulted in the establishment of at least 15 trading venues in the last year alone. Trading volumes on peer-to-peer marketplaces increased when bitcoin’s price rose last year. Trading volumes on localbitcoins.com in Kenya, for example, climbed to $8.1 million in December 2017. Luno recorded 2000 BTC in transactions in November 2017, while the coin was trading around $10,000. South Africa accounted for around 37% of the trades.

Recently, the continent’s oldest exchange revealed big goals. Luno is a South African cryptocurrency exchange. It began operations in 2013 and now has 1.5 million users in 40 countries. It intends to achieve 1 billion consumers by 2025. In comparison, the biggest bitcoin exchange in North America, Coinbase, had 11.7 million customers last year. (For more information, see Coinbase Has More Users Than Schwab.)

There are many reasons why Africa might be the next major cryptocurrency market.

First, local circumstances in Africa are favorable for cryptocurrency adoption. Several African nations are experiencing high inflation. Zimbabwe and South Sudan, for example, both have exorbitant inflation rates. (For more information, see Worst Hyperinflations in History.)

Cryptocurrencies, with their decentralized nature, provide an alternative to destructive central bank practices. In fact, South Africa’s central bank recently launched a pilot test for smart contracts utilizing Ethereum’s blockchain. Second, the continent’s mobile penetration has enabled its inhabitants grow acquainted with bitcoin technology. Africa bypassed the phase of establishing physical banking infrastructure in favor of a decentralized mobile money platform in the creation of its financial services ecosystem.

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New blockchain-based enterprises have developed. BitPesa, a payment platform and money transfer business established in Kenya, collaborates with 60 banks throughout Africa and offers seven mobile wallets. Third, the risk of government regulation, which has lately roiled cryptocurrency markets, is still very low in Africa. While warning about the risks of investing in cryptocurrencies, African officials have adopted a hands-off approach to trading on exchanges.

However, Africa is vulnerable to the same forces that other cryptocurrency markets are. In 2017, cryptocurrency dealers in Africa paid a premium of up to 40% as bitcoin’s price hit new highs. According to some sources, the premium arose owing to a lack of liquidity, which means that sellers were able to charge excessively high prices due to strong buyer demand.

Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is very dangerous and speculative, and this article is not a suggestion by Investopedia or the author to do so. Because every person’s circumstance is different, a knowledgeable specialist should always be contacted before making any financial choices. Investopedia makes no guarantees or warranties about the accuracy or timeliness of the information provided on this site. The author holds a minor quantity of bitcoin as of the day this article was published.

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