Bitcoin trading volumes are on the rise on the African continent despite the ongoing concerns about the high network fees. Data shows peer to peer bitcoin trading platforms recorded spiked growth in volumes starting in April. This was the same time as many countries implemented lockdown measures.
Anecdotal evidence seems to suggest that Covid-19 related regulations are the reason for the volume growth. This “evidence” is observed in Nigeria, already one of the biggest cryptocurrency markets in the world. Some observers from the country say the struggling economy, as well as the volatile currency, are helping to build new momentum for bitcoin as well as altcoins.
To illustrate, they show how the corona virus-induced drop in oil revenues has put increased pressure on local currency. Increased pressure on local currency inevitably leads to capital flight and scarcity of foreign currency.
Available data shows that between March and August 2020, the Naira (the Nigerian currency) has depreciated by 33%, from about 360 to 480 units for every US dollar. The ensuing shortages of hard currency has resulted in some banks limiting the amount of US dollars Nigerians can withdraw each month.
This scenario, which has played out in many African countries similarly affected by the closure of economies, inevitably leads to growing interest in alternatives like cryptocurrencies as Nathaniel Luz, Lead for Dash in Nigeria explains.
Luz says the “increased instability of the Naira” has led to “more Nigerians keeping their money in crypto.”
The high transactions fees
Still, as Luz argues, the high transaction fees associated with a bull market, particularly on the Bitcoin network, are proving to be an unwelcome dynamic.
“Bull runs generate lots of excitement and optimism for the crypto space in general, serving as a good advert for newbies to get on board. With every bull run we see increased fees and slow confirmation times for bitcoin transactions due to the mempool being full,” explains Luz.
This makes the leading cryptocurrency less appealing as an alternative means of transacting or remitting funds.
Echoing Luz sentiments is Chris Maurice, CEO at Yellowcard Financial, the digital currency exchange that helps Nigerians in the Diaspora to send funds home using bitcoin.
According to Maurice, his organization is “seeing growth in volumes” although he admits that the “high transaction fees have definitely impacted us on the operational side, however.”
To try and mitigate the problem, Maurice shares a strategy his company has adopted to minimize the impact of the high fees.
“We move BTC constantly, and at this point, I only move bitcoin at around 2-3 am EST while everyone in the US is asleep and the chain is a little calmer. I’ll send with a ‘reasonable’ fee of $20+ and pray that blocks happen quickly and the coins don’t get caught for 24 hours or more.”
Using higher fees help get transactions confirmed faster, yet as one bitcoin trader from Zimbabwe, William Chui explains, the final transaction cost will be much higher.
The final cost renders moot the appeal of bitcoin for remittances adds Chui:
“The challenge we have is that we pay a premium