Bitcoin Drop Spells Doom For 4 million Kenyan Investors

Fridah Wangechi | 1 year ago
Four million Kenyans risk losing their money after Bitcoin dropped its value in the crypto market. COURTESY

With the high cost of living and desperation to make money fast, many Kenyans have dipped their foot into the world of cryptocurrency with the hope that their digital assets may yield great returns to solve their money problems.

However the industry is now currently facing a big dip in value, as the leading crypto Bitcoin is reported to have fallen below the key level of Kshs 2.3 million ($20,000).

An estimated four million Kenyans mainly made up of young and small traders are now facing potential losses, as their dream of making quick returns now seems bleak with many investors pulling out their money following fluctuations in the market.

The number of Kenyans in the crypto industry could be more, surpassing that of those who are in formal employment which is estimated to be 3.07 million, raising alarm over the high level of unemployment in the country. Students and workers in the informal sector make up the large number of crypto investors.

Blockchain analytic firm Chainalysis states that Kenyans and other millions of investors worldwide turn to the trading of Bitcoin and other types of crypto currencies as a way of preserving their savings, carrying out international transactions either for individual remittances for those working in places like Europe and North America or for commercial use, such as purchasing goods to import and sell.

The commercial use of cryptocurrency is now also being viewed as a solution to the dollar shortage witnessed in the world, as it is convenient and quick because the traders no longer have to buy dollars using the Kenya shilling or fork out fees to money transfer firms like Western Union.

Kenya has been ranked among the top dealers in peer-to-peer cryptocurrency platforms, which allows traders to transact directly with one another without the need for a centralised third party to facilitate the transactions.

The lack of regulation by third parties such as the banking sector however poses a risk as it makes it difficult to establish value of digital assets held by Kenyans, meaning the amount could run into billions. This has been highlighted by the Central Bank of Kenya (CBK) claiming that the emerging assets can be high risk to financial stability in the country.

On Saturday, June 18, the crypto industry was shaken after Bitcoin, the world’s biggest cryptocurrency, dropped to as low as Kshs 2 million ($17,592.78), falling below the key Kshs 2.3 million($20,000) level for the first time since December 2020.

This is pegged on major investors pulling out money from riskier assets to meet margin calls and cushion themselves from potential loss

Binance, the world's biggest crypto exchange, begs to differ stating that it is normal to see such plunges in the market.

“The sell-offs should not really worry crypto investors. What is happening is that some are moving their cryptos to less risky assets, just like what we have seen in the traditional financial markets,”George Mwakisha, Kenya lead representative for Binance stated.

“Cryptocurrencies are new and so most people are operating and commenting from a point of little knowledge. But for millions of unemployed young Kenyans including university students, it is an investment and earns them an income,” he added.

Central bank governor Patrick Njoroge on his part maintains that it is a risk trying to outsmart the system to cut transaction costs which could set a trap for new investors who could lose their hard earned money leading to financial instability in the country.

Related Stories