As of now, there are about 3000 cryptocurrencies in existence. These coins are made to have different uses and modes of adoption. However, they all fall into three major categories. These are; altcoins, tokens, and Bitcoin. This article will factor in global occurrences and how they influence the digital currencies, ultimately making predictive statements on what the remainder of the year hold for the cryptocurrency market in Nigeria.
What is Cryptocurrency, and how does it work?
A cryptocurrency is simply a form of payment that can be used in the enacting of digital transactions for goods and services. It all started with Bitcoin, and there is no need to go into historical details of how it was launched and designed to be a decentralized global system that no one had control over. Eleven years into the creation and sales of the first Cryptocurrency, the landscape has changed. There are now about 3000 of such currencies.
These are then grouped in 3 classes based on the mode of operation and the purpose.
This was the first Cryptocurrency created, and when it comes to the cryptocurrency eco-space in Nigeria, it is the most traded. Bitcoin as a platform is a peer-to-peer electronic payment system, where you can make payment to anyone in the world without needing to go through a mediating organization.
This ease of use is one primary reason why the adoption of Bitcoin in Nigeria has been rapid. And thanks to its finite nature, bitcoin quickly passes for one used to store value, just like Gold. When it comes to purchasing goods and services, it can also be used. For instance, companies like Microsoft and Paypal now accept Bitcoin.
While these hold, the problem faced by Bitcoin and other cryptocurrencies in Nigeria is enormous, and we would dive into this later in this article.
The release of Bitcoin in 2009 was the start of something special – the launch of other coins. It was as though people who the idea of digital currencies had simply waited for the first launch. Eleven years later, there are about 3000 active coins all over the world. The majority of these coins are what falls into the category.
Every other coin other than bitcoin is referred to as “Altcoins” – Alternative currencies. No matter how popular or adopted the currency is, it will never be to par with Bitcoin. Ethereum, ripple coin, dash, etc. all fall in this category,
These are digital currencies too. However, they differ from Bitcoin and the altcoins in that they cannot operate independently. This simply means that they are operated without an underlying blockchain platform. Developers simply build token on already existing blockchains.
Now that you have a basic understanding of what cryptocurrencies generally infer, it’s time to take a deeper dive into its ecosystem in Nigeria, and what 2020 holds.
How has Cryptocurrency faired over the years in Nigeria?
Over the years, in Nigeria, there has been the creation of several platforms that facilitated the exchange of several digital currencies. While most of these platforms are designed to trade Bitcoin simply, some others allow for the transfer of other popular altcoins.
This is thanks to the surge in the adoption of coins in Nigeria and some other African countries. Three years down the line, the crypto coin is not looking to stop in its popularity amongst the youthful population, who are looking for alternative means to earn.
However, lawmakers of the country have been disgruntled by cryptocurrencies. And have tried to leverage power in determining the future of digital cash. In press releases, conferences, and public announcements, the Central Bank of Nigeria heralded the fact digital currencies are not legal tenders in the country. As against the US, where companies are known to receive the coins as payment.
Also, the senate-house of the country backed this claim and made a similar declaration. So far, it has not been working. The reason for this is simple. Cryptocurrencies are primarily traded and used by youths, who see and leverage way out of the hardship caused by the economic mess of the country. It is the sole source of income for many Nigerians who perform transactions with the
Nigeria is a country where the economy is receding, but there is a constant upward growth in the population curve. This is undoubtedly a deficit to the country. In an article by bitcoin website, it is clearly stated that “socio-economic hardships paved the way for cryptocurrency adoption in Nigeria.
Whatever the cause may be, cryptocurrency usage in Nigeria has been on an all-time high in the past couple of years, with Bitcoin and Ethereum leading the charge.
“Is Bitcoin legal in Nigeria?” No, it’s not. However, the trade volume of Bitcoin and other altcoins in Nigeria surpasses that in other countries where it is a legal tender. As of 2018, the trade volume of Bitcoin in Nigeria ranges between 1.2 – 1.6 billion naira, weekly. This proves Cryptocurrency as a growing sector of the Nigerian economy, despite not being a legal tender
This begs the question, “how does Cryptocurrency function in the Nigerian economy?”
Trading Cryptocurrency in Nigeria in 2020
When it comes to trading cryptocurrency in Nigeria, the most common options people go for is Bitcoin. This is because it has the highest value of all cryptocurrencies. Also, there are several platforms exclusively trading the coin.
Trading cryptocurrencies have a similar format, as the very first thing you need to do is to set up your crypto-coin wallet. Then you make the purchase of Cryptocurrency of choice. You can then perform exchanges of these currencies for a product or other type of coin, at a particular value.
However, in Nigeria, the conventional way in which Cryptocurrency is being traded involves buying and selling the coins for cash. Such that traders buy at a particular exchange, then wait for the value to increase and sell to another interested trader. This cycle of buying and instantly selling is the primary way in which the digital currencies are used in the country, as it affords gains following an increase in the value of the coin.
The downside to trading cryptocurrency in Nigeria in 2020 is simply cybertheft. There has been an increase in the number of fraud and breaching activities in the cryptocurrency space over the past two years. It’s becoming more difficult to trade as one does not know who is legitimate or not. Trading platforms are then saddled with the responsibility of spending more resources in making sure their platforms are safe for transactions.
How has 2020 been for Cryptocurrency in Nigeria?
As of the time of writing this article, there is a 0.84% drop in the value of Bitcoin. This comes as no news at this point, as a drop in value, is one major characteristic of Cryptocurrency. They are very volatile and drop sporadically, just as they can heighten sporadically.
In the history of Bitcoin, it reached an all-time high value of $19,891, which the currency achieved on 23rd February, 2017.
While, just like the forex market, global factors amongst others influence the real-time value of Bitcoin, it is deemed to be less stable than FIAT currencies. For instance, when news broke in 2013 that Chinese government rules against the use of Bitcoin as a means of exchange in the country, the value dipped by $300. The following year, the Bitcoin exchange itself refrained from receiving bank deposits, which resulted in another drop in the cost.
The economy of the world is in for a rough ride through 2020, with global happenings rolling out after the other. Late in 2019, China recorded its first case of the CoronaVirus, while Nigeria recorded a first victim on 27th February. Since the start of the outbreak and its subsequent spread to more than a hundred countries, there are predictions that it will cost the global economy about $2trillion.
However, no one knows just how the pandemic will influence the price of cryptocurrencies, especially Bitcoin. Before now, there have been no global issues that threaten the world economy since 2008. Bitcoin launched after the global economic crisis of 2008. As a result of this, there is no past metrics to study or make predictions from.
Bitcoin in Nigeria has seemingly been behaving as it had always done since the downtown of 2017. Though the digital currency is classed as a haven in the global market, it hasn’t always behaved as such. Characteristic of its value are sharp rises and falls.
It is tough to say what the current pandemic will cause to Cryptocurrency, one can only watch and learn. Fewer people are buying Bitcoin due to the panic of the COVID-19. But the fluctuations and price actions are not enough data (even when compared to history) to infer a negative impact due to the CoronaVirus.
Final take (What you should do going forward)
The truth is the future of Cryptocurrency in Nigeria in the year 2020 is all dependent on trader and investor behavior (which is peculiar and unpredictable). There is the saying that where some doom, others see opportunities. Traders and investors all have a different personality, and there is no way to account for what to expect from individuals and organizations.
No matter what is happening to bitcoin or other coins right now, as always, there will be a recovery. The speed of this recovery cannot also be ascertained. Hence, if you are looking to get-rich-quick with Cryptocurrency, then you may want to have a reconsideration of other options for making money.
One thing is sure, crypto currencies like Bitcoin and Ethereum (and other broader assets) are here to stay. You can choose to be humble and look for the opportunities that lay in the current crisis of the world.