The bitcoin price is approaching $14,000 in Zimbabwe as locals have turned to the most prominent cryptocurrency as a vehicle to escape the country’s dire economic and monetary situation.
The bitcoin price has soared to record levels in recent weeks and has positioned itself to surpass even the most bullish year-end price targets. This is especially true following the suspension of SegWit2x, the controversial hard fork that seemed likely to initiate a blockchain and community split.
As phenomenal as this growth has been, however, it pales in comparison to the bitcoin price surge that can currently be observed on bitcoin exchanges in emerging markets like Zimbabwe.
A decade ago, Zimbabwe became infamous for what may be the most extreme case of hyperinflation in modern history. The situation became so dire that the country’s central bank began printing hundred trillion dollar notes. Eventually, the fragile monetary system collapsed, and the country adopted the U.S. dollar as its official currency.
However, the country has struggled to acquire and maintain enough physical dollars to meet demand, so the government has compensated by printing bond notes that are supposedly backed by USD at a one-to-one ratio.
But due to the bank’s dismal history of monetary policy, the bond notes trade at far lower than their stated value. Moreover, foreigners do not accept them, so all imports must be paid for with USD or other trusted currencies. This steady outflow of dollars has worsened the situation, leading the government to implement strict currency controls that have more or less failed to produce the desired effect.
Because of the cash shortage, banks have placed extremely low daily withdrawal limits — often $50 or less — and Zimbabweans stand in line for hours just to obtain this small amount of money — money that is rightfully theirs.
Due to their inability to obtain physical dollars and the capital controls that restrict locals from paying for imports with USD, many Zimbabweans have turned to bitcoin — which they can purchase without having access to physical currency — to store their wealth and pay for imports.
“Bitcoin isn’t subject to the central bank measures so it has become an alternative that importers are willing to pay a premium for,” Zimbabwean technology analyst Nigel Gambanga told CNN in a recent interview.
Demand for cryptocurrency far exceeds supply, causing bitcoin to trade at premiums as steep as 100% within the country. On Harare-based bitcoin exchange Golix, for instance, the bitcoin price has risen as high as $13,900 — more than $6,500 above the current global average price. As of November 10th, 2017 – it sits at around $13,500.
But, faced with a choice between dubious bond notes and a currency whose inflation is outside the hands of a central bank, Zimbabweans are willing to pay that price.