Think bit­coin is get­ting ex­pen­sive? Try Zim­babwe

Oman Daily Observer - - FRONT PAGE -

For most in­vestors around the world, bit­coin is a volatile and highly spec­u­la­tive bet. For Zim­bab­weans, how­ever, the cryp­tocur­rency seems to of­fer rare pro­tec­tion from the on­set of hy­per­in­fla­tion and fi­nan­cial im­plo­sion. Some are turn­ing to bit­coin out of des­per­a­tion as their bank de­posits lose value al­most by the day, while oth­ers are us­ing the on­line cur­rency for house­keep­ing such as fund­ing fam­ily mem­bers study­ing abroad. The re­sult is star­tling.

Bit­coin’s global surge to a record high of $7,888 last week — a sev­en­fold in­crease since the start of the year — has been spec­tac­u­lar enough.

But on Harare’s bit­coin ex­change, Golix, the price hit $13,900, a 40-fold jump in the same pe­riod. Warn­ings abound in­ter­na­tion­ally that bit­coin may be a bub­ble wait­ing to burst.

But the dire state of the Zim­bab­wean fi­nan­cial sys­tem un­der Pres­i­dent Robert Mu­gabe is en­cour­ag­ing risk-tak­ing.

“I have now changed all my re­serves to bit­coin be­cause that is the only way I can pro­tect my in­vest­ment,” said Arnold Man­hizwa, who works for an IT and tele­coms com­pany in Harare.

The gov­ern­ment adopted the US dol­lar in 2009 af­ter a bout of hy­per­in­fla­tion ren­dered the Zim­bab­wean dol­lar worth­less, wip­ing out sav­ings in the now de­funct na­tional cur­rency.

Af­ter a pe­riod of rel­a­tive sta­bil­ity, acute short­ages of dol­lar cash have set in, leav­ing Zim­bab­weans with elec­tronic units in their bank ac­counts which are of­fi­cially called dol­lars but have a far lower — and rapidly de­creas­ing — value.

In Jan­uary if they wanted to buy $100 in cash they had to trans­fer $120 out of their ac­count to a seller on the par­al­lel mar­ket. Now the price is $180 in what are nick­named “zol­lars”. Nearly all do­mes­tic trans­ac­tions are made via debit card or trans­fers us­ing mo­bile phones.

But some econ­o­mists es­ti­mate in­fla­tion is more than 50 per cent a month in zol­lar terms, far from the of­fi­cial, dol­lar-cal­cu­lated rate of 0.38 per cent.

Zim­bab­weans are there­fore pil­ing into any­thing they think might re­tain value. Prices of cars, real es­tate and stocks have all soared, with the Harare bourse’s main in­dus­trial in­dex dou­bling in the last two months.

For peo­ple like Man­hizwa, a 34-year-old fa­ther of two, bit­coin is al­most a safe-haven as­set. “If I have $500 in the bank I won’t get it back and I will be los­ing value, but when I have my bit­coin it is go­ing up ev­ery day,” he said.

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