Crypto trading in Africa on the rise despite challenges

Many people remain curious to know how the crypto industry has transformed the payment landscape in Africa and the factors that have influenced the growth of crypto trading across Africa, even ahead of leading global markets.

By now, many Africans have heard about crypto despite their varied comprehension of virtual or digital currencies.
Young, budding entrepreneurs have leveraged income opportunities in crypto trading, with some practising crypto arbitrage trading and merchants accepting different cryptocurrencies as a medium of exchange.
The ease of converting crypto assets into fiat using mobile money has also made it more accessible for enabling crypto trading in Africa.

Interest in crypto trading in Africa

By now, many Africans have heard about crypto despite their varied comprehension of virtual or digital currencies. Many people may have developed an interest in cryptocurrencies in recent years. In 2022 crypto prices plummeted to new lows after peaking in November 2021. Anyone dealing with cryptocurrencies will attest to the unexpectedly volatile nature of this nascent industry.

The last year was not the first time the prices in the crypto industry plummeted. Between 2013 and 2015, the price of Bitcoin fell from $1,127 to $200, representing an 82 per cent drop. Amidst these market cycles, crypto trading in Africa surges every year, more so examining data available from the last three years. For instance, Africa’s cryptocurrency adoption grew by 1200 per cent in 2021. The global adoption rate stood at 881 per cent in the same year, according to ChainAnalysis. Kenya and Nigeria spearheaded cryptocurrency adoption not only on the continent but across emerging markets.

So far, only a small portion of the population represents crypto adoption in Africa. If this trend continues, Africa is poised to be the next frontier of cryptocurrency adoption. Comparing the number of cryptocurrency owners against the country’s entire population across leading markets on the continent reveals that only 8.52 per cent of Kenya’s population is actively involved in crypto trading. South Africa, Nigeria, and Ghana follow closely at 7.11, 6.31, and 3.01 per cent, respectively. Consequently, many people remain curious to know how the crypto industry has transformed the payment landscape in Africa and the factors that have influenced the growth of crypto trading across Africa, even ahead of leading global markets.

Young and Literate Population

Africa is the second most populous continent, just after Asia, with 1.38 billion people. A report by Mo Ibrahim Foundation indicates that 60 per cent of Africa’s population is below the age of 25, with the average age standing at 18 years. Similarly, literacy rates across the Sub-Saharan region have grown from 64.09 per cent in 2014 to 67.4 in 2021. Regionally, Southern Africa has the highest literacy rate, at 80 per cent. North and East African literacy levels stand around 71 per cent. In contrast, 54 per cent and 67.5 per cent of the adult population in West and Central Africa can read and write.

Contrastingly, more than half of African graduates remain unemployed, with the majority living in urban areas in pursuit of gainful employment. Most of these youths are keen on new income opportunities, which has drawn them to crypto trading. Young, budding entrepreneurs have leveraged income opportunities in crypto trading, with some practising crypto arbitrage trading and merchants accepting different cryptocurrencies as a medium of exchange.

Financial inclusion

Access to financial products and services remains a severe challenge for many African citizens. More than 60 per cent of the population remains unbanked despite financial inclusion being one of the 17 sustainable development goals (SDGs) to eradicate extreme poverty and bolster shared prosperity globally.

Among the reasons for low financial exclusion in Africa are the high bureaucracy practised by financial institutions and the cost to access or transact using an intermediary account. For instance, in Kenya, a bank transaction exceeding Kes $10,000 requires approval from the institution’s management. Research also indicates that banking costs in Kenya stand at an average of $45 per year, contributing to many banks losing their customers.

Crypto trading in Africa has increasingly enhanced financial inclusion by allowing payments requiring little or no documentation. Crypto also cuts costs by allowing transactions at almost zero cost depending on available options to move funds.

Inflation and plummeting currencies

High inflation and devaluation of national currencies are significant economic challenges for many African nations. Countries with the highest inflation rates include Sudan, Zimbabwe, Ethiopia, Ghana, and Nigeria. These rising inflation rates have hurt African economies, leading investors to seek alternative investment options.

Traditionally, people used gold and strong currencies like the US dollar to hedge against inflation. However, the emergence of cryptocurrencies such as Bitcoin and stablecoins like USDT provided additional investment opportunities for investors in these economies.

Interestingly, countries with increased bitcoin trading activity have also seen a sudden rise in inflation, such as Kenya, from 5.4 per cent in 2020 to 7.2 per cent in 2022 and Nigeria, from 11.4 per cent in 2020 to 16.1 per cent in 2022. In 2015, Zimbabwe suffered from severe hyperinflation, forcing the government to print $100 trillion notes. This situation led some citizens to turn to cryptocurrency to preserve their wealth.

Mobile money penetration and crypto trading in Africa

Mobile money has revolutionized the financial payment system in Africa. Over 60 per cent of global mobile money transactions occur through African platforms. The increasing availability of mobile phones has played a significant role in this growth. The International Telecommunication Union (ITU) reports that more than 80.8% of Africans own or have access to a mobile phone. Additionally, more Africans now have gained access to the internet. Consequently, it has become easier for them to learn about emerging technologies such as cryptocurrency trading. The ease of converting crypto assets into fiat using mobile money has also made it more accessible for enabling crypto trading in Africa.