Dec 8, 2022

Mawazo Writing Africa

Writing about the main

4 million Kenyans suffercrypto crash losses

The ongoing collapse in the cryptocurrency industry could push an estimated four million Kenyans holding the digital assets deeper into losses as the leading crypto-bitcoin struggles to stay above the key $20,000 level.

< p>The crypto market, known for its wild price swings, has lost more than half of its value since November of last year as investors dumped money from riskier assets amid concerns about rising inflation and rising interest rates.

This has hit an estimated four million Kenyans, mostly young and small traders, who have flocked to cryptocurrencies in recent years in hopes of quick returns, despite warnings from regulators like the Central Bank of Kenya (CBK) that the nascent assets are high-risk

Blockchain analytics firm Chainalysis, which ranks countries by crypto adoption, announced that Kenya has about four million crypto investors. Chainalysis relies on web traffic data on P2P platforms to track crypto usage in different countries.

The firm that tracks crypto flows for financial firms and US law enforcement agencies assumes so states that Kenya is among the top traders of peer-to-peer cryptocurrency platforms that allow traders to trade directly with each other without the need for a centralized third party to facilitate transactions.

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The four million is higher than the 3.07 million Kenyans who have formal employment, signaling that investors are students and workers the informal sector.

The sector is unregulated in the country, making it difficult to value the digital assets held by the mostly tech-savvy Kenyans, but the amount could be in the billions en.

Kenyan investors buy cryptocurrencies to store their savings, conduct international transactions either for individual remittances for those working in places like Europe and North America, or for commercial purposes such as buying goods for Import and sell, says Chaina lyse.

Paying for imports with cryptocurrency is considered convenient and quick, as traders no longer have to buy dollars with Kenyan shillings or pay fees to money transfer companies like Western Union.< /p>< p>But the recent turmoil is inflicting pain on these retail investors as traders described market volatility as normal.

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“The sell-offs shouldn’t really worry crypto investors. What’s happening is that some are moving their cryptos to less risky assets, just like we’ve seen in traditional financial markets,” said George Mwakisha, Kenya’s senior representative at Binance – the world’s largest crypto exchange.

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

It pulled during the London trading hours on Monday slightly, at around $20,510. But it’s still lost 55 percent of its value this year and 35 percent this month alone in the recent cryptocurrency sector meltdown.

Bitcoin’s fall follows troubles at several major crypto firms. Further declines, market participants said, could have a knock-on effect as other crypto investors are forced to sell their holdings to meet margin calls and cover losses.

This has made it difficult to scale retail assessing investors’ pain from the crypto slump and the impact on future appetites given the murky nature of the market.

Cryptocurrencies are unregulated in many countries and their legal status is unclear, meaning that there no safety net and little recourse if you lose money.

“Cryptocurrencies are new and as such most people operate and comment from a point of little knowledge. But for millions of unemployed young Kenyans, including university students, it is an investment and an income,” said Mr. Mwakisha.

CBK disagrees with Mr. Mwakisha.

The Central Bank Governor Patrick Njoroge says cryptocurrencies pose risks to financial stability, arguing that digital currencies could solve problems such as: B. bringing the poor into the financial system or reducing transaction costs Criminals who wanted to launder 274.4 billion US dollars

CBK invited the public in February to find out about the possible introduction of a digital currency which offers some benefits, particularly in reducing the cost of cross-border payments.

But crypto assets have proved popular in Kenya, despite central bank warnings about their risks.

“There was a lot of hype,” Njoroge said of cryptocurrencies at a virtual event hosted by the International Monetary Fund’s Africa director, Abebe Aemro Selassie, in June.

He suggested Crypto Ass ts could be considered “Wealth product” to be regulated.

The fall in crypto markets coincided with a fall in stocks as US stocks suffered their largest weekly percentage drop in two years on fears of rising interest rates growing likelihood of a recession.

Bitcoin’s movements tended to follow a similar pattern to other risky assets such as tech stocks.

The total crypto market cap is around $950 billion, according to the price side Coinmarketcap, down from a peak of $2.9 trillion in November 2021.

Investments in crypto assets like Bitcoin, chosen alongside non-fungible tokens (NFTs) during the pandemic, driven by perception of safe assets and social media frenzy.

The meteoric rise of leading blockchain tokens sparked excitement and attracted newcomers eager to learn and invest, while some individuals saw it as a safe place to raise money

This story was first published by Business Daily.