Underground markets put 90pc premium on bitcoin

20 Jul, 2018 - 00:07 0 Views
Underground markets put 90pc premium on bitcoin

eBusiness Weekly

Jeffrey Gogo
Bitcoin this week swung back above $7 000 for the first time in several weeks amid a slew of positive developments on the digital currency space.

The benchmark cryptocurrency soared nearly 10 percent to $7 307 on Coinbase July 17, leading a market-wide recovery in global cryptocurrency prices.

Ethereum, a leading altcoin — basically any other virtual currency which isn’t bitcoin — climbed more than 5 percent, briefly crossing $501, it’s highest in a month, before retracing to $497 early morning July 18.

Ripple surged 7,3 percent to 51 cents, according to data from coinmarketcap.com, plummeting several fold from about $3,85 in January.

Bitcoin Cash, a clone of bitcoin that promises faster transaction speeds and cheaper transfer fees, rose more than 8,5 percent to $864, a four week high.

EOS, a token claiming to offer blockchain-based decentralised applications, rebound 10,3 percent to $8,81, to complete the top five most valued cryptocurrencies comeback.

Stellar rose fastest though, soaring over 21 percent to 28 cents after Coinbase, the large American digital currency exchange, announced plans to list the token on its platform, together with four others.

Overall, about $90 billion flowed into crypto markets worldwide on July 17, bringing the total market capitalisation to $293 billion.

Dark web

Here in Zimbabwe, bitcoin is selling at a premium of up to 90 percent.

That’s about $13 880.

It’s hardly surprising why this is so.

Firstly, trades have largely gone underground or shifted to social media since the Reserve Bank of Zimbabwe shutdown the country’s only two exchanges, Golix and Styx24, in May for spurious reasons.

The underground is typically a dark web of scheming, arm-twisting and profiteering.

Golix and Styx24 eliminated some of those risks by providing a centralised exchange system where buyers met sellers and agreed on whatever price they deemed palatable.

Secondly, there just isn’t enough bitcoin to go around.

Too much money chasing too few bitcoins. Nothing inflationary. Just the market forces of supply and demand at play.

Not even Golix and Styx24 could prevent a certain amount of premium being added on to the international price, albeit, at a lower rate.

Current Zimbabwean bitcoin prices appear to track the US dollar black market rate, which is priced at three different levels depending on how the payment is made — by bank or mobile transfer; paper notes; and or coins.

Each dollar costs about twice as much for the cash transfer of Zimbabwe’s substitute currency known as “bond”, by bank or mobile phone.

This specific rate has gone up by about 100 percent in the last few months, as national foreign currency reserves dry up amid a surge in demand by industrial companies and individuals who need it to pay for items such as raw materials, health bills, university fees and others, abroad.

So, it often is the case that those investors with access to US dollars buy bitcoin on exchanges outside Zimbabwe — though this not always an easy thing to do — before offloading the same on the local market, for a tidy profit.

Arbitrage. Rife in common stocks on the Zimbabwe Stock Exchange and elsewhere, particularly with multi-listed shares like Old Mutual.

The final selling price of bitcoin here, therefore, reflects a combination of several different factors, made worse by the absence of formal, centralised trading platforms, as is the case in other forward-looking economies, countries like South Africa. Or even repressive Uganda.

Bull market

Around the world, a bit of positivity issued from different quarters.

The world renowned Chartered Financial Analysts (CFA) Institute announced it will start to include blockchain technology in its curriculum starting next year.

Students who sit for the CFA examinations in 2019 will face questions on cryptocurrencies and the technology which supports it. Investors view this as a key step towards the mainstreaming of bitcoin and the thousands of its lesser cousins.

There were reports too that American fund manager BlackRock Inc, the world’s biggest, with a portfolio in excess of $6,3 trillion, was considering to put some money into bitcoin.

But the charts had long predicted some recovery. For many weeks now bitcoin has struggled to break out of the $5 900 — $6 300 range.

At some point, the coin appeared set fall to below $5 300 on negative investor sentiment, regulatory clampdowns, issues of hacks and others of price manipulation.

The dust has yet to really settle, but there is a general acceptance by governments, traders and investors now that cryptocurrencies may be here to stay, and that the more reasonable plan isn’t shutting them out, but finding better ways of integrating them into mainstream finance through regulation.

Pundits have guided bitcoin to test $10 000 in the nearest term, specifically between July 22 and 27, as the charts show resistance to current support levels on account that, one the price has been too low for a long time, and two, the trends say so.

If that doesn’t happen, something big will still happen, but in the opposite direction.

It’s times like these when it is easy to dismiss cryptocurrencies as nothing but speculative streak “that will come to a bad end”, as billionaire investor Warren Buffet put it.

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