Zimbabwe: Coups and Cryptocurrencies

As most of the world focuses on the political impact of Zimbabwe’s coup, a select group of analysts and technology watchers is scrutinizing the effects of the government upset on cryptocurrencies in developing nations. Directly after the Zimbabwean military took control of Harare and placed President Robert Mugabe under house arrest, the price of bitcoin on Zimbabwe’s sole exchange surged as demand for the currency spiked. The dynamic shows the value of cryptocurrencies in times of extreme political instability and portends a change in how Africa’s elites protect and move their assets, which could have myriad implications for the region’s economy.
After Mugabe and his wife, Grace, were placed under house arrest, several media outlets reported that the country’s sole cryptocurrency exchange, Golix, was experiencing higher-than-normal traffic and that bitcoins on the exchange were trading at nearly twice the rate to the dollar as in the rest of the world. Golix manages a minuscule portion of the total bitcoin traded through global exchanges and peer-to-peer exchanges. Moreover, as Quartz reported, Golix has low liquidity, which helped spike prices, and Zimbabwe’s peer-to-peer bitcoin prices have remained comparable to those on global trading markets. The value of buying cryptocurrencies through Golix rather than by other methods is that Golix accepts cash-to-bitcoin transactions in Zimbabwe while other methods are useful only for a purely digital transaction. These facts, however, are but a small part of the much bigger story of how bitcoin and other cryptocurrencies will fundamentally change how unstable markets operate in times of turmoil.

This post was published at FinancialSense on 11/20/2017.