Without a doubt, we are in cryptocurrency winter – and it is cold and dark. Everything within the crypto statistics, news, and market sentiment tells us we are in a bear run. Let me explain if you don’t know what a bear market is. A crypto bear market is a period of decrease and very volatile downward swing of 20% or more in cryptocurrency token price, i.e. most people are afraid, uncertainty abounds, and wants to sell their crypto holdings.
We’ve had crypto bear markets before in history. First was the 2014/2015 crypto bear market lasting about two years, followed by the late 2013 bull market (the crypto market cap went from $15 billion to close to $3.5 billion in 2015). The second was the 2018 crypto bear market which lasted for about a year, with the crypto marketing cap massively declining from $820 billion to just above $100 billion.
The third and current 2022 bear market, which followed the high 2021 crypto rally, has sent a deadly decline throughout the crypto universe, reducing the value by $2 trillion. The price of the leading cryptocurrency (Bitcoin) declined as much as -70% from an all-time high of $69,000 in November 2021 to the current $16,000 in November 2022. Also, other crypto tokens like Solana, Doge, Ethereum, Avalance, Copiosa, ADA Cardano, and Algo are suffering from a massive decrease in value.
The contributing factors to this current crypto bear market include the Terra/Luna crash to the lending crisis of 3AC, Voyager, and Celsius, the Russia-Ukraine war, inflation, rising energy prices across Europe, regulating authorities’ attempt to govern crypto (SEC vs Ripple and China’s crypto mining) and the latest very crazy collapse of FTX – the world’s third largest cryptocurrency based on transaction volume.
How Africa’s crypto transactions are on the rise despite the crypto bear market
Despite the fact that ada price and other cryptocurrencies are experiencing crypto bear market, which has followed 2021’s massive crypto rise, where every single cryptocurrency has experienced massive price declines, and fear is heavy amongst traders and investors, cryptocurrency has continued to experience a huge surge on the African continent.
According to the 2022 Global Crypto Adoption index by Chainalysis, a reputable blockchain forensics institution, Africa’s crypto market witnessed a growth of over 1200% between 2020 and 2021. In addition, four African countries – South Africa, Kenya, Nigeria, and Tanzania- all rank within the global crypto adoption top 20 nations. The reasons for this include the following:
1. Retail Traders and Users: Because about 50% of Africans are unbanked, 95% of all African crypto transactions are retail and are mainly used as a backchannel from Africa’s centralized banking system’s multiple failures instead of the investing and speculative reasons of most crypto users in European and American users. Hence, the crypto bear market has had almost no negative impact on Africa’s retail crypto trading.
2. Foreign Money Exchange: In most African countries, the exchange rate offered by South African brokers to the US dollar is very horrible. Therefore, cryptocurrency has become the easiest way for most of Africa’s young population to access US dollars to out-fox the cryptocurrency ban of most African countries to send and receive money from family, friends, and clients (for remote freelancers) across the world.
3. Inflation: The devaluation of most African currencies and rising inflation rates of African economies have made cryptocurrency a favorable investment option and a preferred means of preserving monetary value. For example, it makes more sense to store funds in stable coins like USDT than in the Nigerian or Zimbabwean economy when the inflation rate is close to 20% and 90%, respectively.
4. NFTs and Gaming: The rise of NFTs and gaming across the African continent has massively pushed cryptocurrency adoption and market size on a grand scale. The P2E (play-to-earn) mobile gaming model has accelerated crypto adoption among Africa’s youth. The rise of startups like Afriguild (backed by Algorand Foundation) has only fuelled crypto adoption across the African continent.
African countries like El Salvador legalized bitcoin as a legal tender in 2021, with 20% of businesses already accepting bitcoin as payment in the country. The Central African Republic adopted Bitcoin as legal tender in April 2022, while Zimbabwe installed a Bitcoin ATM operated by Golix (the nation’s first and largest crypto exchange).
South Africa’s crypto transaction rise in the Crypto bear market
According to the October Finder’s cryptocurrency adoption index, which analyzes and evaluates the rise of cryptocurrencies amongst internet users through a survey of 329,473 people across 26 selected countries (with 12,018 in South Africa), South African cryptocurrency ownership stands at 4.2 million people, second only to Nigeria and leading Kenya in third place. The report further shows that men in South Africa are 1.7 times more likely than women to own crypto, while the most owned cryptocurrency in the nation is Bitcoin at 47%. In this report, the crypto ownership rate in South Africa was put at 11%, which is lower than the global average of 14%, with India leading the list at 28%. The report also shows that crypto adoption and rise in South Africa is mainly driven by the younger population, with the 18-34 age group making up 42% of crypto owners. In contrast, those age 52+ are the group least likely not to own crypto, making up 22% of crypto owners in South Africa. Overall, South Africa ranks 17th out of 26 countries for crypto adoption.
Despite this rise in the adoption of cryptocurrency in South Africa, driven by its young population, there are several issues resisting its growth. The biggest among them are Ponzi schemes, crypto scams, and fraudulent crypto exchanges within South Africa that have caused massive loss of funds for South Africans. In 2021, the founders of a crypto exchange in South Africa – Africrypt – dissolved into thin air after informing their clients their accounts had suffered a hack; a loss of $3.6 billion was recorded. While in June 2022, US regulators filed charges against South African resident Cornelius Johannes Steynberg and his company (Mino Trading International Proprietary Limited – MTI) in a Bitcoin fraud scheme case equaling $1.7 billion.
This is why the South African government, through the Financial Sector Conduct Authority (FSCA), declared crypto as a financial product and said all companies that trade in cryptocurrencies and other digital assets like NFTs would be required to obtain a license. This regulation is the first step to bringing sanity and protection for South African crypto users. The period for licensing and registration of crypto platforms in South Africa will begin between 1 June and 30 November 2023 – however, unregistered crypto exchanges are permitted to continue business till then.
Also, Binance, the world’s largest cryptocurrency exchange – re-entered South Africa’s crypto futures market in September 2022. This re-entry comes almost a year after the Financial Sector Authority (South Africa’s financial markets regulator) issued a circular which blacklisted Binance from offering services in South Africa.
Conclusion
The rise of cryptocurrency in Africa and especially South Africa will most likely continue because of the dominance of the region’s young population which is a key driver of crypto growth, and the challenges posed by the region’s centralized banking industry.
- Coinsmart. Europe’s Best Bitcoin and Crypto Exchange. Click Here
- Platoblockchain. Web3 Metaverse Intelligence. Knowledge Amplified. Access Here.
- Source: Plato Data Intelligence: Platodata.ai
