An industry report by cryptocurrency exchange, KuCoin has revealed that more Africans are being pushed into the cryptocurrency market because of the rising inflation and devaluation of local currencies.
According to the report, this is so because many are avoiding losing the value of their savings following the consistent devaluation of currencies and the rising inflation rate plaguing most countries on the planet.
In Nigeria, the Central Bank has devalued the naira three times in the last two years, while inflation is down from 16.47 percent in January 2021 to 15.7 percent as of February 2022 – but the figure is said not to reflect market realities.
The naira is becoming weaker in response to the aforementioned, and with some African countries sharing similar fate, Nigerians and citizens of the continent are turning to bitcoin and other crypto assets to maintain their purchasing power.
This fueled the number of cryptocurrency users in Africa by 2,467.2 percent year-on-year, according to the KuCoin report for last year, and this drove growth of crypto transactions by over 2,500 percent in 2021, while monthly transactions grew 1,386.7 percent.
Explaining the impact of inflation and devaluation in the adoption of the digital currency, KuCoin wrote, “the adoption of crypto technologies in Africa was preceded by the availability of the technology and the presence of several motivating factors.
“These include the desire of the population to react quickly to any changes in the exchange rate of national currencies in countries with high rates of inflation and devaluation,” the report reads.
The cryptocurrency exchange further stated that, “The possibility of quickly transferring investments across assets mitigates the chance of savings depreciation.”, although the report acknowledged that not all countries are as inflationary.
However, it said, “the desire to preserve the purchasing power, even under 6.4 percent inflation (Tunisia), is natural for those seeking to preserve the value of their savings.”
Aside from trying to mitigate inflation and devaluation in the continent, Africans also embraced cryptocurrency to evade high cross-border transfer fee, with many crypto cross-border transactions hovering around 0.01 percent.
The low transaction fee serves as an incentive, hence cross-border transfers accounting for 88.5 percent of cryptocurrency transactions in Africa, “In many cases, users pay less than 0.01 percent of the overall amount of the transaction transferred in cryptocurrencies.