Tue, Nov 14, 2017 - Page 11 News List

Desperate Zimbabweans eye bitcoin

Reuters, HARARE

For most investors, bitcoin is a volatile and highly speculative bet, but for Zimbabweans the cryptocurrency seems to offer rare protection from the onset of hyperinflation and financial implosion.

Some are turning to bitcoin out of desperation as their bank deposits lose value almost by the day, while others are using the online currency for housekeeping, such as funding family members studying abroad.

The result is startling. Bitcoin’s global surge to a record high of US$7,888 last week — a sevenfold increase since the start of the year — has been spectacular enough, but on Harare’s bitcoin exchange, Golix, the price hit US$13,900, a 40-fold jump in the same period.

Warnings abound internationally that bitcoin might be a bubble waiting to burst, but the dire state of the financial system under Zimbabwean President Robert Mugabe is encouraging risk-taking.

“I have now changed all my reserves to bitcoin because that is the only way I can protect my investment,” said Arnold Manhizwa, who works for an information technology and telecom company in Harare.

The government adopted the US dollar in 2009 after a bout of hyperinflation rendered the Zimbabwean dollar worthless, wiping out savings in the now defunct national currency.

After a period of relative stability, an acute shortage of US dollars has set in, leaving Zimbabweans with electronic units in their bank accounts which are officially called US dollars, but have a far lower — and rapidly decreasing — value.

In January, if they wanted to buy US$100 in cash they had to transfer US$120 out of their account to a seller on the parallel market. Now the price is US$180 in what are nicknamed “zollars.”

Nearly all domestic transactions are made via debit card or transfers using mobile phones, but some economists estimate inflation is more than 50 percent a month in zollar terms, far from the official, US dollar-calculated rate of 0.38 percent.

Zimbabweans are therefore piling into anything they think might retain value. Prices of cars, real estate and stocks have all soared, with the Harare bourse’s main industrial index doubling in the past two months.

For people like Manhizwa, a 34-year-old father of two, bitcoin is almost a safe-haven asset.

“If I have US$500 in the bank I won’t get it back and I will be losing value, but when I have my bitcoin it is going up every day,” he said.

Manhizwa, who participates in online chatrooms discussing cryptocurrencies, says he deposited US$20 in bitcoin for his newly born daughter a few months ago. Now it is worth more than US$200.

“If I put that money in a bank right now in Zimbabwe I will be left with nothing,” he said.

Globally, the value of all cryptocurrencies is more than US$170 billion and bitcoin, the biggest and best-known, has outperformed all traditional currencies every year since 2011, except for 2014.

However, many international investors still view it as an opaque instrument used by gun-runners and drug dealers on the Dark Web that should be avoided.

The risks are clear. After reaching the record peak, the international price of bitcoin slid more than US$1,000 in less than 48 hours last week.

In Zimbabwe, the Golix exchange’s Web site showed at one point on Sunday that the price had tumbled below US$11,000, a drop of about 8 percent in 24 hours.

However, all this has to be compared with the zollar.

This story has been viewed 1127 times.

Comments will be moderated. Remarks containing abusive and obscene language, personal attacks of any kind or promotion will be removed and the user banned.

TOP top