Tag: bitcoin

Bitcoin: Navigating The Dip

A person or group of people operating under the name Satoshi Nakamoto launched Bitcoin in 2009. A worldwide army of enthusiasts swiftly adopted the cryptocurrency. It currently has user dashboards looking like the silhouette challenge however.

HOW BITCOIN WORKS

Bitcoin is a digital currency which has no ties to any bank or government. Bitcoins are basically lines of computer code that are digitally signed each time they are transferred from one owner to the next.

Users create the coins, “mining” them by lending computing power to verify other users’ transactions. For that, they receive Bitcoins in exchange. The coins however have monetary value. They can be bought and sold on exchanges with U.S. dollars and other currencies.

Since coming to light, cryptocurrency has been widely hailed as everybody’s “inroad” to financial independence. Some businesses receive Bitcoin for payment and a number of financial institutions allow it in their clients’ portfolios. Overall mainstream acceptance is still quite limited though.

Leading cryptos Bitcoin and Ethereum have endured a turbulent time over the past week. Share prices have dropped by 37.10% and 42.23% respectively. The market crash follows a decision by Tesla to no longer accept Bitcoin as payment for its vehicles, as announced by the car company’s CEO Elon Musk.

More recently also, China banned financial institutions and payment companies from providing services related to cryptocurrency transactions and warned investors against speculative cryptocurrency trading.

WHAT TO DO?

  1. Don’t Panic. The most important thing you need to have in order to make the decision is your head. Whether you are going to buy the dip, see the dip out or get out while you can, use your head. We are not telling you to not be afraid of losing your money. But, be sure you’re not just making an emotional decision.
  2. Assess and Evaluate. From a place of calm, make research, keep abreast of news and developments regarding cryptocurrency. It’s not the first time in recent times that the market is being hit. Just in February, the Central Bank of Nigeria (CBN) banned Nigerian banks from dealing in all forms of cryptocurrencies, then Tesla, now China, and there have been conversations surrounding India.
  3. Make a Decision. Assess the situation and what it means for the future. As a result, you will be making an informed decision. This provides an action plan that reflects your current view on the potential risks and opportunities of cryptocurrencies.

The plunge in cryptocurrency markets may have you unsettled. But remember, this is not the first time the market is dipping.

Bitcoin in Nigeria: After the Ban

Recently, the Central Bank of Nigeria (CBN) banned Nigerian banks from dealing in all forms of cryptocurrencies; including bitcoin.

Why was Bitcoin banned?

The Central Bank of Nigeria cited ‘use of digital currency for laundering and terrorism‘ as the chief reason for banning cryptocurrencies. This comes shortly after several bulls run in the price of bitcoin, gaining over 300% price increase from 2020.

Starting earlier on the month of February 2021, Nigerian banks and other financial institutions were authorized by CBN to cease crypto transactions or face a penalty.

Away from the financial powerhouses, experts have analyzed how bitcoin ban in Nigeria would impact local traders.

The Nigerian cryptocurrency market

Looking back at statistics, Quartz Nigeria placed Nigeria as the second-largest bitcoin market in the world after the United States. Stears Business reported in February 2021 that over $200 million worth of crypto is traded from Nigeria monthly. That’s a huge market to consider!

The bitcoin ban in Nigeria simply means that it would be difficult to directly convert the Naira to bitcoin, or trade bitcoin for items.

However, it does not stop at that.

The CBN regulation immediately affected many fintech establishments in Nigeria dealing with virtual accounts. Providus bank took a special hit, having to halt all virtual accounts following the order. VTpass had to temporarily deactivate all virtual accounts and recently reactivated all accounts with new virtual account numbers.

Conversations following the ban continue to float all over the internet. But what is the solution? What is the way forward for Nigerians looking to continue crypto trading amidst the ban?

Here’s our researched take:

  1. Consider Peer-to-Peer Trading: Pending when the ban would be lifted, the most viable solution to buy crypto at the moment would be P2P trading. This is buying privately from a trusted source (a friend, a local agency, etc.) as trading involving bank transfers would be impossible.
  2. Create a Domiciliary account: Well, since there are no restrictions on domiciliary accounts, you can open one, convert Naira and Dollars, and trade cryptos through that account.

Cryptocurrencies trading may have been banned in Nigeria, that doesn’t mean the digital currencies are done for. The future of cryptos for the African market remains bright against all odds.