Bitcoin spike fuels windfall earnings in Nigeria, Kenya and South Africa

Major gains for African crypto investors as demand for Bitcoin propels the token back to record highs.

Seth Onyango, bird story agency

Bitcoin’s surge is fueling a financial bonanza in Africa’s most dynamic economies, with crypto investors recording remarkable growth in their digital asset portfolios.

Investors across Nigeria, Kenya, South Africa and Egypt can expect unprecedented windfall earnings as the world’s leading cryptocurrency raced past its record peak this week.

Omotayo (not his real name), a crypto trader from Nigeria who requested anonymity, told bird story agency that many of his fellow traders who resisted the urge to panic-sell their tokens when Bitcoin’s value fell from an historic high in November 2021, are now reaping the benefits. The token fell from its high of US$68,791 recorded on November 10, 2021 to a low of below US$16,000 at the end of 2022, before a resurgence near the end of 2023 that reached a crescendo this week, with the coin shooting past its previous high on Tuesday (March 5) to reach US$69,208.79.

Yet, there’s a caveat: traders in Nigeria are essentially walking a tightrope due to the Central Bank of Nigeria (CBN)’s clampdown on cryptocurrency activities.

“Nigerians have an opportunity to capitalise on the surging demand for Bitcoin, the regulatory uncertainty keeps us on our toes,” said Omatayo.

“One day, we’re celebrating gains; the next, we’re worried about potential restrictions.”

Last week, Nigeria’s central bank governor, Olayemi Cardoso said that in 2023, some US$26 billion worth of untraceable funds flowed into the cryptocurrency exchange Binance, as Nigerians hedged against a falling local currency by buying cryptocurrencies. With the rally in Bitcoin, many of those individuals will have seen significant gains, while holders of the naira lose over 50% of its value in 2023.

Nigerian authorities recently detained two visiting Binance executives as part of a crypto crackdown they hope will halt speculation on the weakening naira. Meanwhile, Bitcoin on Monday (March 5) burst past $65,000 for the first time in more than two years as demand widens beyond hardcore enthusiasts, nearing its all-time high.

Its market capitalisation now holds strong at over US$1.3 trillion, supported by a substantial trading volume.

For African investors and cities buzzing with crypto activity, it is a bet finally paying off, with Nigeria, the continent’s biggest crypto market raking in the biggest spoils.

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Nigeria has the second highest grassroots crypto adoption in the world behind India, according to Chainalysis’ September 2023 figures.

Bloomberg attributes Bitcoin’s impressive rally to increased demand “beyond hardcore enthusiasts.

Other facts include increased institutional adoption, regulatory clarity, and innovation in the crypto space.

Recent developments that have also boosted the confidence of investors are the launch of the first Bitcoin exchange-traded fund (ETF) in the U.S. and Canada –– and the integration of Bitcoin into PayPal.

“With more money getting into Bitcoin through the ETFs, it means the demand will go up, which, hopefully, will see Bitcoin’s price go up. That is the expectation,” David Gitonga, founder of blockchain consultancy firm Kanga Labs told the East African last month.

Visa now also enables crypto withdrawals on debit cards in 145 countries, allowing users to exchange crypto for fiat currencies without using a centralised exchange –– signalling a wider acceptance and integration of crypto assets into the financial global ecosystem.

For African crypto enthusiasts, these developments are a validation of their long-held belief in the potential of Bitcoin to transform the financial landscape of the continent.

Many of them see Bitcoin as a hedge against inflation, currency devaluation, and political instability. They also see it as a way to access global markets, remit money across borders, and create wealth.

Chainalysis notes that Africa has some of the highest peer-to-peer (P2P) transactions, especially in Nigeria and Kenya where consumers use them to sidestep stringent financial regulations that curtail cash transfers from banks to cryptocurrency businesses.

Regulators in the two countries have been by advising banks not to allow these transfers but P2P platforms, which are non-custodial, let customers trade cash for cryptocurrency amongst themselves.

Therefore, users can send cryptocurrency to centralised exchanges for more trading options if they so choose.

Cross-region transfers also make up a bigger share of Africa’s cryptocurrency market than any other region at 96% of all transaction volume, versus 78% for all regions combined.

Adedeji Owonibi, CEO and founder of a Nigerian blockchain consultancy, Convexity, told Chainalysis previously that Nigeria’s cryptocurrency economy has changed since the country’s central bank disallowed banks from facilitating cryptocurrency transactions.

“Binance used to be the most popular platform by far, but after the central bank’s sanction, many are moving to P2P platforms, like Paxful and Remitano,” he said.

Owonibi noted that lots of P2P activity is taking place over informal group chats on messaging apps rather than on conventional platforms.

“Informal P2P trading is huge in Nigeria on Whatsapp and Telegram. I’ve seen young people and businessmen in these groups carry out transactions for several million with popular OTC merchants.”

On Thursday, February 29, Owonibi called on the Nigerian government to regulate crypto activity to curb crimes, noting its overarching influence on the economy.

“Nigeria should completely regulate Cryptocurrency activities within the country, and set out laws to that effect because if there is no law, there is no offense,” he told Nairametrics.

“There is a need for Financial Institutions such as banks to make sure that the VASPs they are opening accounts for are compliant exchanges, and not gateways for people trying to launder money.”

Africa accounted for US$117.1 billion in cryptocurrency transactions in the year to June 2023, constituting 2.3% of the global transaction volume.

Centralised exchanges in this period, proved to be the go-to platforms, channelling over half of the region’s digital asset volume, according to blockchain analysis firm, Chainalysis.

In a notable deviation from global trends, Africa’s digital coin market leaned heavily on retail investors. The bulk of the transactions were pegged under the US$1 million mark, illustrating a distinct retail-driven trend compared to other regions.

Though historically one of the smaller players in the crypto arena, Africa’s in-depth data paints a story of deep market penetration and a significant shift in the financial habits of its residents.

Some of the factors that have contributed to the growth of crypto in Africa are the high penetration of mobile phones and the internet, the young and tech-savvy population, and the high cost and inefficiency of traditional financial services.

However, there are also challenges and risks that crypto investors in Africa face, such as regulatory uncertainty, lack of consumer protection, cybercrime, and scams.

Some governments, such as Nigeria and Egypt, have tried to ban or restrict crypto transactions, citing concerns over money laundering and tax evasion.

However, these measures have not deterred the crypto community, which has resorted to peer-to-peer platforms, VPNs, and other workarounds to bypass the restrictions, with many African crypto investors remaining optimistic that the future is bright.

bird story agency