4m Kenyans suffer crypto crash losses


4 million Kenyans suffer from cryptographic losses

The ongoing collapse in the cryptocurrency industry could push some four million Kenyans who hold digital assets deeper into losses. PHOTO ARCHIVE | NMG

The ongoing collapse in the cryptocurrency industry could push some four million Kenyans who hold digital assets deeper into losses, as the major Bitcoin cryptocurrency struggles to stay above the key 2.3 million Sh ($ 20,000) level ).

The crypto market, known for its wild price fluctuations, has lost more than half its value since November last year as investors pulled money from riskier assets amid worries about rising inflation and rising interest rates.

This has reached the estimated four million Kenyans, mostly young and small traders, who in recent years have turned to cryptocurrencies in hopes of a quick return, despite warnings from regulators such as the Central Bank of Kenya (CBK) that emerging assets they can be elevated. risk.

The blockchain analysis firm Chainalysis, which ranks countries in adopting cryptocurrencies, has revealed that Kenya has about four million crypto-investors.

The firm, which tracks cryptocurrency flows for U.S. financial corporations and law enforcement, believes Kenya is among the top traders in peer-to-peer cryptocurrency platforms, allowing traders to transact directly with each other without the need of a centralized third party to facilitate transactions.

READ ALSO: Coinbase cuts 1,100 jobs as cryptographic crisis worsens

The four million are more than the 3.07 million Kenyans who have formal employment, indicating that the investors are students and workers in the informal sector.

The sector is not regulated in the country, which makes it difficult to establish the value of digital assets owned by Kenyans, mostly technology experts, but the amount could reach billions.

Kenyan investors buy cryptocurrencies to preserve their savings, conduct international transactions both for individual remittances for those working in places like Europe and North America or for commercial use, such as buying goods to import and sell, Chainalysis says.

Paying for imports via cryptocurrency is seen as convenient and fast because traders no longer have to buy dollars using Kenyan shillings or pay fees to money transfer companies like Western Union.

But recent turmoil is inflicting on these retail investors, as traders felt that market changes were normal.

READ ALSO: Bitcoin avoids big losses but pessimism reigns in the crypto markets

“Settlements should not be a concern for cryptocurrency investors. What is happening is that some are moving their cryptocurrencies to less risky assets, such as what we have seen in traditional financial markets,” said George Mwakisha, Binance’s chief representative in Kenya. largest cryptocurrency exchange in the world.

Bitcoin, the world’s largest cryptocurrency, fell to $ 17,592.78 on Saturday, falling below the key $ 20,000 level for the first time since December 2020.

It recovered slightly during London trading hours on Monday, around $ 20,510. But it still lost 55 percent of its value this year and 35 percent just this month in the latest collapse of the cryptocurrency industry.

The fall of Bitcoin continues to be a problem in several major cryptocurrency companies. Other declines, market players said, could have a side effect as other crypto investors are forced to sell their holdings to deal with margin calls and cover losses.

This has made it difficult to measure the pain scale of retail investors ’fall in cryptocurrencies and the effects on future appetite given the murky nature of the market.

Cryptocurrencies are not regulated in many countries and their legal status is unclear, which means there is no safety net and few resources are lost.

“Cryptocurrencies are new, so most people are operating and commenting from a point of little knowledge. But for millions of unemployed young Kenyans, including college students, it is an investment and an income earner,” Mwakisha said.

CBK has a different view of Mr. Mwakisha.

Central bank Gov. Patrick Njoroge says cryptocurrencies pose risks to financial stability, arguing that digital currencies could solve problems such as bringing the poor into the financial system or reducing transaction costs.

READ ALSO: Binance denies it was used by criminals to launder Sh274.4bn

CBK in February invited the public to learn about the possible introduction of a digital currency, offer some benefits, especially in reducing the costs of cross-border payments.

But cryptocurrencies have become popular in Kenya despite central bank warnings about their risks.

“There has been a lot of hype,” Njoroge said about cryptocurrencies at a virtual event moderated by International Monetary Fund Africa Director Abebe Aemro Selassie in June.

He suggested that cryptographic assets could be regulated as a “product of wealth.”

The fall in cryptocurrency markets coincided with a fall in equities, as US equities suffered their biggest weekly decline in two years in the face of fears of rising interest rates and the growing likelihood of a recession.

Bitcoin movements have tended to follow a pattern similar to other risky assets, such as technology stocks.

The global capitalization of the cryptocurrency market is approximately $ 950 billion (102.1 trillion sh), according to the Coinmarketcap pricing site, below a peak of $ 2.9 trillion (340.6 trillion sh) in November of 2021.

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