The price of bitcoin (BTC) on local social media groups such as Whatsapp this week hit more than $19 600, about 200 percent above the global average price, as panicky investors searched for a safe haven for their wealth amid runaway price increases and a falling local currency.
This means that when the USD- bond/RTGS rate hit 400 percent on the streets of Harare last week, triggered by uncertainty over monetary and fiscal policy direction, the price of bitcoin here reached $31 000, compared with the $6 200 that obtained on international markets at the time.
The last time bitcoin traded above $30 000 in Zimbabwe was at the end of last year, when cryptocurrency prices all around the world went haywire. At its peak, the benchmark digital currency tested $20 000 on global markets, but local prices have always tended to add on a certain premium for various reasons.
Bitcoin trades have gone underground or shifted to social media since the Reserve Bank of Zimbabwe (RBZ) shutdown the country’s only two digital currency trading platforms, Golix and Styx24, in May on allegations of violating Exchange Control regulations and of offering unlicensed banking services.
But cryptocurrency trading did not die with the ban. Instead, it reinvented itself on Whatsapp, through peer-to-peer trades. Over time, crypto enthusiasts have built strong Whatsapp groups where they share information and news on developments taking place in the sector.
Now, they are using similar groups to buy and sell cryptocurrency, utilising connections they already know or new ones. A certain amount of trust has since been established within the community, which is key to building confidence and preventing theft.
Current Zimbabwean BTC 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 two times as much for the cash transfer of Zimbabwe’s substitute currency known as “bond” (which authorities claim is 1:1 with USD), by bank or mobile phone.
This specific rate has gone up by about 400 percent in the last few weeks 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 and university fees.
So, as other investors with access to bitcoin on foreign exchanges take advantage of the chaos to make a profit through arbitrage, the final selling price of bitcoin in Zimbabwe, 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 elsewhere in Africa.
On the global markets, bitcoin briefly touched $7 500 on Tuesday after stable coin Tether, which is tied 1:1 against the US dollar, seemed to be in trouble, falling to around 87c at global exchange Bitfinex.
There is some kind of unwritten relationship between the two coins, which props up BTC each time Tether appears to encounter even the slightest of trouble.
But once the stable coin looked to have put its house in order, climbing back to US97c, bitcoin retraced to around $6,535 as of yesterday morning.
The currency has struggled to break out of the $6 200-$6 800 range for a time, as issues of persistent hacks and regulatory uncertainty in the most developed markets keep investors at bay.
In Zimbabwe, punters in the country find virtual currency as a safe hedge against economic volatility, currently characterised by foreign currency shortages, low production and inflationary pressures.