Yes, you read that right, Bitcoin is trading for roughly an 85% premium on the Zimbabwean Exchange.
However, it is not strictly because people are enamored with the currency.
There is major economic turmoil going on in the region, similar to what is going on currently in Venezuela.
Adding further to the price escalation is the fact that there is only one exchange trading Bitcoin in Zimbabwe, and that exchange is Bitcoinfundi:
How could this happen?
Several reasons actually.
First, it starts when a local fiat currency gets inflated into oblivion and loses most of its value. People have no reason to hold the local currency because it is basically worthless.
They begin hoarding things like gasoline, food, medical supplies, gold, and now Bitcoin (as well as several other digital assets).
Then, once that starts to happen and since there isn't many places for Bitcoin to trade in the country, it begins trading at a massive premium.
I know what you are thinking, arbitrage the Zimbabwean Exchange!
On first thought, I am sure many traders out there are trying to figure out how they can buy Bitcoin on a local exchange and then unload it on the Zimbabwean exchange.
Don't try it.
Most likely it won't work out how you are hoping it will. At least according to the few people that I have read about trying it:
The currency debasement and economic turmoil is not a new development in the region.
Zimbabwe has been dealing with economic problems and food shortages for some time now. The currency has been losing value against the dollar and most other currencies for years.
Bitcoin was proposed as a potential solution some time ago.
In fact, last year the Zimbabwe-based economist, Philip Haslam stated this:
"The thing about Bitcoin is once you import it into the country, you don't have the problem of the currency eroding and perishing like you have with notes. It's a system that allows for privatized banking."
(I used to coach a young man named Philip Haslam on my golf team several years back, perhaps there is some relation here. I will have to look into the name a bit.) :)
Haslam's idea is not that outlandish of an idea, especially when you consider that most fiat currencies have an average life span of 27 years. Roughly every 30 to 40 years fiat currency fails and has to be retooled.
No wonder Bitcoin is looking so interesting to people.
Deflationary money can't work, can it?
Economists tell us that we have to have inflationary money in order for the economy to function the most effectively and effeciently. However, people seem to be flocking to deflationary money as they feel like they can't ever stay ahead of the inflation game.
Especially in areas were turmoil breaks out.
Bitcoin may never catch on as a de facto currency, but it certainly could turn into a form of digital gold that works very well as a store of value.
If that is the case, and Bitcoin captures just 5% of the current gold market, we are looking at $25,000 Bitcoin.
If it gains traction with some form of currency use as well, well you do that math on where it could go...
Stay informed my friends.
Sources:
https://community.fidorbank.uk/groups/bitcoin-education/the-average-life-expectancy-fo
https://news.bitcoin.com/bitcoin-prices-skyrocket-on-zimbabwean-exchange-during-economic-turmoil/
Image Sources:
https://news.bitcoin.com/bitcoin-prices-skyrocket-on-zimbabwean-exchange-during-economic-turmoil/
https://millennialmoola.com/2016/07/19/seriously-consider-replacing-all-your-bonds-with-tips/
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