The amount of people using bitcoin in South Africa is growing in leaps and bounds. More people and businesses are accepting bitcoin as a method of payment as the value of bitcoin continues on an upward trend. People like the idea of their money being worth more in the future than it is today, and bitcoin is designed to be that way.
Bitcoin is deflationary, and the production of new bitcoin that is introduced into the market declines every 4 years. This means that bitcoin becomes more rare over time. Combined with the usefulness, the scarcity of bitcoin makes it valuable.
The price of bitcoin is volatile, but over time the volatility has decreased, and these days it has become easy to buy and sell bitcoin quickly and without much hassle. All this makes bitcoin a great “go-to” option as a hedge against the Rand or any other fiat currency.
The USD as a world standard currency, any increase in the USD interest rates devalues our own currency. The price of bitcoin being mostly in USD and converted to Rand, means that as our currency devalues against the USD, the price of bitcoin increases locally.
South Africans have started to put money into bitcoin to hedge against the devaluation, inflation, and price fluctuations of the Rand.
You can really see this when there are sudden swings in the value of the Rand. Bitcoin traders know this, and as soon as there is any hint of the Rand losing value, the price of bitcoin locally starts going up with the increased demand. Traders swap Rand for bitcoin, remove themselves from the Rand volatility, then trade some back to Rand when the dust settles. In 2015 when the Rand lost over 30%, bitcoin gained around 30%, and traders who took the risk reaped the rewards.
As the price of bitcoin slowly continues on its volatile but ongoing upward trend in price, it is becoming the logical choice for people wanting to hedge against their own currency inflation and devaluation, or even as a store of value.
In 2016 bitcoin doubled in value, and while it was the worst performing currency in 2014, it has been the best performing currency in 2010, 2011, 2012, 2013, 2015 and 2016.
In 2017 bitcoin has been volatile, but is still seen as a safe place to go for South Africans, when Rand volatility is on the horizon. Recently when President Zuma fired Pravin Gordhan and reshuffled the cabinet of South Africa, the price of bitcoin locally went up around R1000 overnight.
Rand volatility continues
On Monday 03 April the Rand volatility continued, causing the bitcoin price to jump in price again.
According to a New24 article:
The rand weakened sharply by over a percent on Monday morning as an analyst warned traders to prepare themselves for “big moves up and down”.
By 09:45 on Monday, the rand had dropped by 1.26% to trade at R13.57 against the greenback.
South Africa could be downgraded to junk status as soon as Monday by S&P, who reportedly had an emergency meeting at the weekend, according to Business Day.
The link between the Rand dropping against the dollar, and the price increases in bitcoin is obvious to see, and as things get worse for the Rand, expect the price of bitcoin locally to skyrocket.
How can you buy bitcoin?
If you would like to buy bitcoin, you can register for a free account at the Ice Cubed bitcoin exchange. You can contact the support on the exchange if you need any assistance, and we suggest you learn the basics of bitcoin trading at our bitcoin trading school.