Bitcoin Achieves Record Highs in Nigeria, Argentina and Turkey despite 50% Price Drop

2023-11-09, 07:42

[TL; DR]

Residents of Nigeria, Argentina and Turkey have adopted Bitcoin as a means of payment and a store of value since there is high inflation in these countries.

The anticipation of the approval of spot bitcoin ETFs, Ripple’s partial win over the SEC and an increase in institutional adoption of bitcoin led to its recent price surge.

Analysts encourage people who live in countries with high inflation to use bitcoin and stablecoins instead.

Introduction

Recently, there was much news about bitcoin, the number one cryptocurrency by market capitalization. Apart from the frenzy surrounding bitcoin exchange traded funds (ETFs) and the enacting of crypto regulation in various countries there is much talk about its adoption in economies which are battling with inflation.

Today, we explore how bitcoin is helping people in Nigeria, Turkey and Argentina to deal with various economic challenges. We will also analyze the factors behind the recent surge in bitcoin price.

Bitcoin Hits All-time-highs in Countries with Inflationary Currencies

The bitcoin price recently reached all-time-highs in countries like Nigeria, Argentina and Turkey which have highly inflationary currencies.

In a period that stretched between 23 and 24 October investors would buy Bitcoin for about $35,000. However, during the same period the value of bitcoin spiked to 979,017 Turkish liras (TRY), 12.17 million Argentine pesos (ARS) and 28.44 million Nigerian nairas (NGN).

Remarkably, many people in these countries use bitcoin to hedge against inflation and to deal with other economic problems like shortage of their local currencies. Let’s specifically look at why Nigerians, Turks and Argentinians prefer bitcoin to their local currencies.

Reasons Why Nigerians Prefer Bitcoin to Naira

There has been a shift in Nigeria’s stance against cryptocurrencies over the years as more people prefer bitcoin to the country’s local currency, the Naira. As a result, transactions in bitcoin have increased by 9% year-over-year. By June, the Nigerians had carried transactions worth over $56.7 billion.

There are several reasons why there is an increase in the use of bitcoin in the country. However, the main reason is that Nigeria is grappling with high inflation. Therefore, the residents use bitcoin to prevent the depreciation of their money.

As an example, between 23 and 24 October the value of the Naira against the United States dollar dropped sharply. Specifically, the Naira with an annual inflation rate of 25% is ranked 15th worst currency in the world.

According to the International Monetary Fund (IMF), Venezuela has the highest annual rate of inflation which stands at 360%. Zimbabwe comes second with a rate of 314%, followed by the Sudanese pound (256%). Argentina has the fourth highest inflation of 122%. On the other hand, Turkey has a 51% annual inflation rate.

Many analysts have encouraged citizens from countries with highly inflationary currencies to use cryptocurrencies like bitcoin and stablecoins. To make matters worse, the Nigerian government has placed restrictions on the use of foreign currency like the United States dollar and the British pound.

Another cause of the free-fall of the Naira has been too much dependence on oil revenue. In respect to the current situation in Nigeria, Chainanalysis quotes Moyo Sodipo, the co-founder of Busha, a Nigerian-based cryptocurrency exchange as saying, “People are constantly looking for opportunities to hedge against the duation of the naira and the persistent economic decline since COVID.”

Second, many people in Nigeria are unbanked which makes bitcoin attractive to them. They also prefer bitcoin because remittance fees in the country are very high. In fact, Nigeria is among the countries with the highest peer-to-peer trading platforms in the world. Thus, bitcoin has lower transaction charges.

Next, Nigeria has a very young population. As a fact, over 65% of the people in the country are under 25 years, making them inclined to use digital assets like bitcoin. In addition, many Nigerians have access to the internet and electronic gadgets like computers and smartphones.

The other pressing reason why Nigerians have a high bitcoin adoption rate are the ongoing cash shortages in the country. In most cases, people spend a lot of time in bank queues in a bid to get cash. Such a sad scenario has forced them to use alternative means of payment like bitcoin and stablecoins.

Additionally, it is also cheaper and more convenient for people in other countries to remit funds to Nigeria. If two people send bitcoin and cash to Nigeria at the same time people in the country will get BTC instantly. Yet, it may take several days to get the cash.

It is important to note that the Nigerian government has not banned cryptocurrencies but it discourages its use. However, like many Africans, Nigerians view bitcoin as a toolkit for financial freedom. The following graph indicates that Nigeria is leading in cryptocurrency adoption in Sub-Saharan Africa.

Cryptocurrency Use in Sub-Saharan Africa - Chainanalysis

Reasons Why Turks Prefer Bitcoin to Lira

The problems which Turkey is facing are similar to the ones people encounter in Nigeria. As mentioned earlier on, Turkey has a high inflation rate. A study conducted in June indicated that Turkey’s inflation rate could be over 160%, although the official rate was 79%.

Already, the Lira’s value against the United States dollar has dropped significantly. Recent data shows that the Lira has depreciated by 26% against the dollar which has eroded the wages of most workers in the country.

In the past, the Turks used foreign currency to maintain their purchasing power. However, that has proved ineffective in the face of high inflation in the country.

Interestingly, the Turks have various ways of getting cryptocurrencies in the country. For example, many companies use cryptocurrency,especially bitcoin, to pay their employee wages. Another recent report showed that more than 50% of Turks use cryptocurrency resulting in a viable Turkish crypto market.

Notably, the KuCoin Understanding Crypto Users report, indicated that since 2021 Turkey has registered a 52% increase in the number of people using cryptocurrency to hedge against rising inflation. Out of these, 71% of crypto users in the country use bitcoin.

The KuCoin report has indicated the depreciation of the Lira as the factor that resulted in bitcoin adoption.

The report states, “The share of crypto investors among Turkish aged 18 to 60 has grown by 12% over 18 months, from 40% in November 2021 to 52% in May 2023, suggesting a growing interest and acceptance of crypto among the Turkish population. In the meantime, Turkish Lira has depreciated over 50% against US Dollar, making crypto a haven from inflation.”

Many Turks are free to use cryptocurrencies because there is no digital asset regulatory framework in place in the country. However, the country’s central bank banned the use of cryptocurrencies from buying goods and services.

Reasons Why Argentinians Prefer Bitcoin to Peso

Argentina faces the same problem as Nigeria and Turkey, high inflation which is eroding the consumers’ buying power. Since the Peso (ARS) is losing value at a rapid rate most Argentinians have adopted cryptocurrencies, especially bitcoin. A year ago people could convert the Peso to the United States dollar at a rate of 1: 115.75. Now, the current rate is around 1: 224.52.

Apart from the problem of inflation, many Argentinians are unbanked as a result of stringent requirements of the banking sector and high transaction fees. Therefore, most of them have opted to use bitcoin and other cryptocurrencies due to their decentralized nature.

The good thing is that the Argentine government has maintained a neutral stance on cryptocurrency in the country. Since there is no crypto regulation the government neither endorses nor prohibits the use of cryptocurrencies. Therefore, cryptocurrency in Argentina is flourishing and helping the citizens to maintain their purchasing power. In case of any Bitcoin price drop the users can hold them until its value rises again.

In the meantime, the acting Minister of Finance has proposed to introduce a central bank digital currency (CBDC) to solve the country’s inflation rate.

Another interesting development in Argentina is that many companies are paying employee wages using cryptocurrencies. It is also worth noting that Argentina has an employment law that allows employers to pay their employees in cash and kind. According to Buenbit, an Argentine crypto exchange, the number of companies that pay their workers in cryptocurrency have increased by about 340% within a year.

Factors behind the Recent Surge in Bitcoin Price

There were various factors that caused the recent bitcoin price surge such as the anticipation of spot bitcoin ETF approval and an increase in institutional bitcoin adoption.

The news of a possibility of approval of bitcoin in the United States was a key factor for the recent bitcoin price surge. Importantly, the fact that the US SEC did not appeal against a court ruling that compelled it to review Grayscale’s spot bitcoin ETF application gave many crypto investors confidence that the SEC will approve BTC ETFs in 2024.

The market believes that the approval of spot BTC ETFs will result in greater bitcoin adoption than before. If that happens the BTC price may rise remarkably.

Recently, several large companies have shown interest in bitcoin which has helped to push its price up. Firms that include Square, Visa, PayPal and Tesla have invested in cryptocurrencies. Some of these have promised to invest in bitcoin as well.

Ripple’s partial win over the SEC also created much hype in the crypto sector which influenced the bitcoin price to rise. In July a Federal Court of Law ruled that the sale of XRP on exchanges does not constitute investment contracts. In that case, XRP is not a security. Later in the year, the same court declined the SEC’s appeal against that ruling.

The improvement in regulatory clarity in many countries that include Singapore and the City of Hong Kong, for example, has created confidence in the crypto market which resulted in prices of various cryptocurrency to rise.

Conclusion

Nigeria, Argentina and Turkey recorded all-time-high bitcoin prices in their local currencies. That was a result of high domestic inflation. In response, many people in these countries use bitcoin to maintain their purchasing power. This is because during periods of inflation bitcoin acts as a hedge against currency depreciation.

FAQs about Bitcoin

What is the highest price of bitcoin ever recorded?

Bitcoin reached its highest price of $68,789 on 10 November 2021 following the news that El Salvador had made it a legal tender and the launch of the first futures-based bitcoin ETFs. However, the bitcoin price started falling when inflation soared in the United States.

What was the price of bitcoin in 2008?

In 2008 bitcoin had a value of $0.00 since people had not started using it. The first bitcoin transaction occurred on 22 may 2010 when Laszlo Hanyecz, a BTC enthusiast, purchased 2 Papa Johns pizzas for 10,000 BTC.

What was the price of bitcoin in 2010?

Bitcoin had a value of $0.003 at the start of 2010. It attained a high of $0.40 and an average of $0.30. According to these statistics during 2010 the price of bitcoin increased by about 9,900%.

Does Argentina purchase bitcoin?

People in Argentina can buy and sell bitcoin. However, BTC is not a legal tender in the country but many individuals and companies use it. For example, some firms pay their employees using bitcoin and stablecoins.

Why is crypto so popular in Nigeria?

Most Nigerians use cryptocurrency to hedge against high inflation that exists in the country. Shortage of cash in banks as well as high remittance fees also force individuals to use bitcoin and other cryptocurrencies.

How big is the crypto market in Nigeria?

Nigerians have carried bitcoin transactions worth more than $56.7 in 2023, a 9% year-over-year increase. Despite the economic turmoil in Nigeria the use of cryptocurrencies is increasing year-by-year.

Author: Mashell C., Gate.io Researcher

*This article represents only the views of the researcher and does not constitute any investment suggestions.

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