Poor Economic Conditions
Zimbabwe, a land locked country known for its dramatic landscapes and diverse wildlife, is seeing one the worst economic conditions in the world. The country comes second in place for the highest number inflation rate, just behind Venezuela. Unlike Venezuela, which is an oil rich country, the African nation relies mostly on mining of precious minerals and tourism. The country had seen intensive growth in the 1980s and 1990s, but in the last two decades, mismanagement of resources and sanctions by United States has seen the economy of the country drastically fall.
Cryptocurrencies are banned in the country. The high inflation rate means there is an increased demand of alternate assets. Cryptocurrencies are a lucrative investment and with limited supply and an increasing demand has resulted in a BTC/USD rate that is unprecedented. Sellers on LocalBitcoins.com are demanding roughly USD 100,000 per BTC. With Bitcoin hovering around USD 10,000 in the international market, this means sellers are asking for an x1000 premium.
The Zimbabwe government has banned cryptocurrencies and that has resulted in many local crypto exchanges moving out to other countries. Golixis such an example. The crypto exchange has expanded operations neighboring African countries, such as Nigeria, Kenya, Uganda and others. Rather than complain on the local ban, the crypto exchange has said that it gave them a reason to put in effort and expand their operations, which has resulted in the exchange spreading its wings.
With the ban, locals of the country are forced to use Over The Counter (OTC) exchanges, such as Remitano and LocalBitcoin. These and other OTC exchanges act merely as escrow, with people transferring their cryptocurrencies on the platform, it lets sellers and buyers connect. When a deal is agreed, the agreed amount of cryptocurrency is held by the exchange and the buyer can send money to the buyer, usually directly as a bank transfer. When the money is received, the seller agrees to release the cryptocurrency and the platform shifts it from the seller’s wallet to the buyer’s. In this way, the ban on local trading is circumvented. Yet, with hardly any checks, sellers can demand any rate they choose.
A hyperinflation of 175%, reintroduction of the Zem Dollar and ban on use of other currencies, including cryptos, means that sellers are demanding any price they see fit, resulting in an astounding USD 100,000 per BTC.