Instability in Zimbabwe could send bitcoin prices higher.
Zimbabwe’s military initiated a coup against President Robert Mugabe, the controlling leader who has been the head of Zimbabwe for nearly 40 years. The military denies it is trying to over throw the government, but the 93-year-old president has purportedly been taken into custody. This throws the country’s political future into chaos.
When times are hard and financially critical, people turn to the assets such as gold to conserve their wealth. Bitcoin and other cryptocurrencies, with their attractive returns, have begun to break into gold’s market share, and it would not be shocking if this alleged coup leads more Zimbabweans into the emerging bitcoin markets.
CNN has stated that bitcoin trades at sky-high premiums in Zimbabwe because of the cash scarcity and tight governmental controls that were implemented by the Mugabe regime. Controls were set up to keep physical cash from leaving Zimbabwe. The country technically uses the US dollar as its certified currency, a shortage of actual dollars caused the Mugabe regime to print notes attached to dollars at a one-to-one ratio.
Zimbabwe’s government is continually increasing the “zollar” supply at a rapid pace; far more than the dollar-denominated rate of 0.38%. Reuters reports that residents have been turning their money into value-retaining assets. This includes bitcoin.
“There is inflation setting in in Zimbabwe and bitcoin is an interesting store of value,” Taurai Chinyamakobvu, a blockchain and tech expert in Zimbabwe, told CNN in a current interview.
Increased interest in bitcoin and the rise of the zollar has caused bitcoin prices to increase as high as $13,900 on Harare-based bitcoin exchange Golix. The current exchange prices for bitcoin is at $13,3350 or a full $6,000 above the worldwide average.
If the immediate coup causes stabilization issues in Zimbabwe, bitcoin prices could rise even higher. However, if the new regime assumes a less-inflationary monetary policy, bitcoin prices would fall closer to the worldwide average.