Friday, February 3, 2023
  • Over four million Kenyans dealing in these digital assets could be pushed deeper into losses as the leading crypto, bitcoin, continues to dip harder into a bear market
  • Over the whole of last week, Bitcoin has been struggling to stay above the US$20,000 mark
  • On June 21, 2022, the crypto fear and greed index stood at 9 (Extreme Fear)

The whole of 2022 has been challenging for cryptocurrency traders, with bitcoin dropping by over $45,000 from its all-time high in November 2021 as other cryptos follow suit.

The crush has been fodder for crypto opponents who continue to propel the idea that these cryptos cannot sustain in the market for a long time. Toning down to Africa, Chainalysis estimates that over four million Kenyans dealing in these digital assets could be pushed deeper into losses as the leading crypto, bitcoin, continues to dip harder into a bear market. Over the whole of last week, Bitcoin has been struggling to stay above the US$20,000 mark.

Since Satoshi Nakamoto introduced cryptocurrencies, the market has been notorious for wild price swings. Investors continuously pull out their money amid worries over rising inflation and the soaring interest rates. On June 21, 2022, the crypto fear and greed index stood at 9 (Extreme Fear).

Read: Africa: The urgent need for regulations to protect crypto investors from fraud and scams

The four million Kenyans who have been affected by the crash are mainly young and small and medium traders. The youth have, in recent years, stormed into cryptocurrencies hoping to get quick returns, despite warnings from the Central Bank of Kenya about the emerging digital markets.

Chainalysis ranks Kenya as the top dealer in P2P cryptocurrency platforms globally. P2P allows traders to transact directly with one another without the need for a centralised third party, such as the CBK, to facilitate crypto transactions.

Kenya lacks regulations in the crypto sector, making it difficult to establish the value of digital assets held by the primarily tech-savvy Kenyans that could be running into billions of dollars.

Four million Kenyans dealing in these digital assets could be pushed deeper into losses as the leading crypto, bitcoin, continues to dip. web3africa.news

Four million Kenyans dealing in these digital assets could be pushed deeper into losses as the leading crypto, bitcoin, continues to dip.

Why Kenyan investors buy cryptocurrencies

Kenyan investors buy cryptocurrencies to facilitate the following;

  • Preserve their savings
  • Perform international transactions either for individual remittances or commercial use, for example, purchasing goods to import and export.

In Kenya, the payment of imports through crypto is more convenient and quick because the traders no longer have to convert currency from the Kenya shilling to the dollar or pay fees to money transfer companies like Western Union.

However, the recent meltdown is inflicting pain on these retail investors already trading through cryptocurrencies.

On the contrary, George Mwakisha, Kenya’s lead representative for Binance, is optimistic about the sell-offs, saying that what is happening to the crypto market is similar to what is happening in the traditional markets; traders are moving their cryptos to less risky assets.

He added that despite the crash, cryptocurrencies have become a revenue source for many university students.

Central Bank of Kenya’s stand on cryptocurrencies

Patrick Njoroge, the central bank governor, says that crypto poses considerable risks to financial stability. However, he agrees that these digital currencies could help bring the poor into the financial system and cut transaction costs.

Read: Crypto adoption and usage in Africa soars despite challenges

Additionally, cryptos continue to gain popularity in Kenya despite the government restricting them.

Early this year, The CBK invited the public to give their views on a Central Bank Digital Currency. The government wants to introduce the CBDC to ease cross-border payments and reduce the holding of the fiat currency.

Bitcoin fall crashes crypto firms

Bitcoin’s fall has raised challenges among several major crypto firms.

Some have dropped programs they were sponsoring, while others have gone bankrupt. Other crypto investors have been forced to sell their holdings to cover losses and meet margin calls.

However, investing in crypto-assets such as bitcoin and Ethereum picked up during the Coronavirus pandemic alongside nonfungible tokens (NFTs). The adoption was driven by the perception that digital assets are safer following the insistent lockdown globally.

The meteoric rise of leading blockchain tokens elicited excitement, attracting newcomers who wanted to learn and invest, while some individuals saw it as a safe place to put money.

Read: Raila and Ruto: In whose hands is crypto and blockchain safe?

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