By Jeffrey Gogo
Bitcoin this week proved its qualities as a safe haven at a time of political and economic uncertainty, as local stocks took a beating. The Zimbabwe Stock Exchange (ZSE) suffered one of its biggest sell-offs in recent memory, after the surprise military takeover of Government on Nov ember 15 triggered panic in the markets.
Stocks held steady early on the day of the takeover, but suffered steep losses for the next five days to November 22.
More than $6 billion was wiped off the ZSE’s total market value in that period.
The bond notes transfer rate dropped sharply, from $1,65 against the US dollar to around $1,25 by Wednesday morning.
A televised speech by former president Robert Mugabe last Sunday night urging calm and reconciliation found no takers.
Until he resigned as president late Tuesday afternoon.
But as equities went through one of the most dramatic and volatile trading in modern day Zimbabwe, the emerging digital currency bitcoin spiked.
Bitcoin this week reached a record high $14 400 on the Harare-based trading platform Golix.com, up more than 9 percent from the time the military seized power in a bloodless transition.
By early yesterday morning the price had dropped slightly, however.
Sellers looked for between $13 700 and $14 000 on an exchange that now clocks over $1 million trades each month, from a few hundred dollars when trade started two years ago,
Buyers were prepared to pay anything in the range of $13 250 to $13 500.
The virtual currency has rallied more than 1 400 percent since January, when it traded for around $950.
On Golix.com, as with several African virtual money exchanges, bitcoin trades at a massive premium, sometimes as high as 90 percent, due to high demand and liquidity shortages.
The Zimbabwe situation illustrates the existing foreign currency crunch.
So, in the end, investors with access to foreign currency buy bitcoin from overseas cheaper, before reselling on the local exchange at a higher price.
The global price of bitcoin has climbed more than 600 percent year-to-date, to an all-time high $8,200, according to data from coinmarketcap.com.
Its market value has swelled above $137 billion, as investors pile into a digital currency lauded by its creators as independent, people-driven, and so, free from the ‘usual’ government manipulation synonymous with fiat currencies.
Bitcoin has divided opinion worldwide. That’s in large part due to the cryptic nature of the technology that supports it — a mathematical algorithm — understood only by a few technology geeks, and therefore, open to misuse.
And also because of its intention to take away control from governments, or at the least severely curtail it, on how the currency is managed.
Governments are known control freaks where currency is concerned, using it to drive through key economic policies.
Some central banks have, with good reason, raised concern bitcoin could be used by criminals to launder money.
In China, a cracked down on digital currency exchanges in the last few months has forced trading platforms such as Huobi and OkChain to start to consider moving operations into countries like Hong Kong and Singapore.
The Chinese authorities accused bitcoin of lacking a legal foundation, even as Japan legalised and regulated trade, while Russia, North Korea, Australia and other countries have started to invest seriously in bitcoin.
Here, the Reserve Bank of Zimbabwe this week declared bitcoin, and the rest of its crypto cousins like Litecoin and Dash, which are traded on Golix.com, illegal.
Without sufficient knowledge or the relevant law to back up crypto currencies trading in Zimbabwe, the RBZ could be seen to be acting rationally.
But to fight bitcoin would be a losing battle.
The apex bank’s stranglehold on external payments due to a critical shortage of foreign money has now forced local investors to look for options.
“To regulate (bitcoin) will be the best option for the central bank,” said a local bitcoin analyst who preferred anonymity.
“In the long run, regulation is going to be beneficial to bitcoin, in making it a legitimate currency. Central banks and governments will also benefit through taxes. Rather than fight crypto currencies, authorities should embrace them.”
Bitcoin has allowed Zimbabweans to pay for goods and services abroad, such like universities, health and other imports, where bitcoin is accepted.
The bticoin price surge on the local exchange reflects this reality.
By comparison, foreign investors have struggled to repatriate money from the Zimbabwe Stock Exchange, forcing the RBZ to come with special funds for this purpose.
Now, in view of bitcoin’s ability to ride internal political and economic upheavals as seen in
Zimbabwe, Venezuela, North Korea and elsewhere, some people have started to draw parallels with gold, the age–old value storer.
“Bitcoin has proved itself as a digital gold, a safe haven, in a few countries already,” said Kobus van Rooyen, a bitcoin investor, with interests here and in South Africa.
“The future will reflect that whatever uncertainty we might get, a lot of people will likely move their cash towards crypto currencies, specifically bitcoin.”
Kobus said one of the key drivers in the price of bitcoin this year was the election of Donald Trump as US president.
“There has been a lot of uncertainty since Mr Trump came to power,” he told the Business Weekly in a voice message, adding that “talks of a third world war due to the North Korea crisis” have spurred investment into virtual money, as “a safe haven for political unrest”.