Nigeria investors and speculators are reducing their exposure to bitcoin which has seen transaction volumes in the country drop to an all-time-low in January on the Coin.dance chart. Volumes hit N87.7 million in the first 20 days in January down from over N1.8 billion it recorded on the last week of December, 2017. The last time volume traded below N100 million was in October, 2016.
The price of Bitcoin on global indexes has been on decline since the beginning of the year. The cryptocurrency tumbled to a record low of $9,714.02 on the Coindesk Bitcoin Price Index (BPI) on 17 January. It did recover this weekend climbing as high as $12,956 during Saturday’s trading session. However, it was to decline again on Monday to a low near $10,050 and remained at $10,334.80 on the Coinmarketcap Index as at the time of writing.
Increased regulatory activities in countries like South Korea and China have been the major drivers of the decline. The regulatory authorities in South Korea announced on Tuesday that a proposed ban on anonymous trading accounts will take effect January 30.
“Those who do not have their real-name accounts at the same bank with the exchanges will not be allowed to make new deposits into the exchanges accounts. They will be only allowed to make withdrawals,” stated a release from the South Korean Financial Services Commission.
However, Nigerian cryptocurrency exchanges are confident that the era of regulation is positive news for tokens like bitcoin.
“Not only do we know that regulation will come to the industry, we welcome it,” said Owenize Odia, Country Manager of Luno, an international crypto firm with a location in Lagos. “We are in constant discussion with banks, regulators and other fintech companies – all around the world – about the industry. Regulation ultimately brings clarity to businesses and consumers and it aims to keep fraudsters, charlatans and other operators with low concern (or capabilities) to keep customer information and money safe. We have seen that, in the short term, government statements can have an impact on the price of bitcoin.”
Analysts at Nairaex told BusinessDay that the future of regulatory frameworks are established and will have little chance of restricting the use of cryptos like bitcoin as they remain private and anonymous.
“It is likely that government restriction from Asian countries will be light. This is primarily due to the popularity and number of crypto users in Asian countries particularly South Korea. With many forms of gambling illegal, many look to investments such as bitcoin to provide a huge profit at a large risk.
“In my view, bank’s can work alongside crypto as we see certain banks in the US such as Merrill Lynch preparing to launch bitcoin backed investment funds. Even if banks do come in to regulate and control bitcoin and crypto the prospect of crypto as an investment tool would not be ignored,” said the analysts at Nairaex.
Tim Akinbo, founder of Tanjalo.com a crypto exchange, told BusinessDay that he also does not see central banks being able to sufficiently regulate cryptocurrencies.
“You cannot regulate what you do not have control over. It is data. It is open-source software; a ban will only temporarily affect the price as we have seen historically from the actions of central banks. So cryptocurrencies are not going anywhere. A ban on cryptocurrencies may even be likened to an attack on freedom of speech and expression (there has been an argument on why this is); so while a total ban is very likely, the effect is also not likely to last.”
Despite the dropping prices which has affected other top traded cryptocurrencies, Nairaex said it is still going ahead to introduce other tokens on its platform.
“We are still launching the altcoins we announced this year as it will provide Nigerians increased number of options for trade. Also with more complicated coins such as Ethereum, using the technology, it will provide Nigerian with a hands-on experience to reap increased knowledge on the cutting-edge crypto technology being developed. The trading fees on altcoins are also substantially lower such as Ethereum, and Litecoin with bitcoin transaction fees on the blockchain averaging well over $20 per exchange,” they said.