• Adoption rate gains 10 percentage points in one year, says report
• Scammers migrate to crypto P2P trading platforms
• Buying, selling of stable coins gain traction
• Non-enthusiasts, young professionals save stablecoins in digital wallets
• Asians, others feast desperate youths with trading bots
One year after the Central Bank of Nigeria (CBN) barred financial institutions from handling cryptocurrency-related transactions, the number of youths getting involved in speculative trading, a part of the fast-growing online gaming and gambling culture, has continued to grow in leaps and bounds.
The novel cryptocurrency blurs the line between gambling, speculation and investment. Whereas everybody playing in the psychological-trapping new culture believes they are investing. The Guardian learnt that the majority rarely know what they are betting their money on, but are merely influenced by unrealistic fantasies and pressure from equally amateurish ‘investors’.
Indeed, Nigerians trading such assets avoid terms that may give them away to the settlement banks to avoid the ban, while others deploy digital wallets and other forms of peer-to-peer platforms of functions.
The card, it was revealed, is backed with a full academy that takes subscribers through the complexity of digital currency trading and blockchain technology. Users could store as much as $500,000 in the credit card, which can be used globally.
Webinars on trading bots are also rife in the market. In some cases, a subscriber pays $100 or more as yearly fee and another $20 for what is described as a ‘fueling’ fee.
As the name suggests, the second fee helps the bot to move around buying and selling coins when it sights a trading opportunity and deposits proceeds in dedicated wallets.
Nigerian agents are often assigned the responsibility of marketing the innovations, in a manner that reminds one of the antics of networking marketing, for commissions and other benefits.
Even as the future of cryptocurrency gets increasingly complicated, the demography of Nigerians who play in the highly risky assets continues to expand. Housewives, professionals and artisans have joined the game, which used to be exclusive to students and digitally savvy individuals.
The new asset class is also assuming the status of an industry with entrenched value chains expanding by the day. Today, non-enthusiasts have found a place in the ecosystem to also earn a living.
The insulation of the financial system from the risks has redefined interest in stablecoins (cryptocurrencies backed by real-world assets such as commodities, fiat currencies issued by governments). USDT and BUSD are privately issued stable coins but with par value with the USD. The value of other cryptocurrencies is benchmarked on USDT and BUSD, which are as stable as fiat currencies. When the market tanks, its value against USDT falls.
Findings have shown that high net-worth individuals are fast establishing intermediation businesses with a specific focus on stablecoins, especially USDT.
The individuals, who operate especially in Lagos, Abuja and Port Harcourt, trade in stablecoins outside the custodian person-to-person (P2P) platforms, which are plug-ins on popular exchanges such as Binance, KuCoin and Coinbase. The merchants buy stablecoins and sell to traders who wish to put in fresh investment at margins. A dealer who pleaded anonymity said he makes, at least, N20 per USDT.
Once such assets are released, the dubious buyers sever communication with the second party while the exchange closes the transaction as a fully executed deal as the appeal window closes once assets are released.
Despite these risks, coupled with the extremely high volatility in the market, hundreds of first users are signing up on digital trading platforms daily for various reasons – holding, staking and trading. The native users, who are mostly youths, trade- n different coins, estimated at 10,000 as at the beginning of the month. They trade based on any fundamentals, a meme and guess.
A few of them take the game further, they play in the futures market, which allows one to bet with an asset as collateral and leverage it in multiples of 100 for trading.
A single market move could get the position liquidated with collateral lost. Daily, thousands of Nigerians take to dedicated platforms to share their grief after such liquidations.
A trader, Sola Bade, said he was more inclined to “investing more money with the hope that it will double or triple when he gains than taking profits.”
Another trader, Felix Onelue, said Bade’s behaviour defined the tendency of most crypto investors and major reason majority are trapped in endless losses.
“It reflects the new social pressure that is intensified by the popularity of social media. People would rather see what they wish to be than be realistic. Before you open a trade, you should be able to set a target and discipline yourself to adhere to the target. But this rarely happens in reality,” Onelue, who said he has been trading in the past five years, said.
The groundwork for bitcoinsation, a concept that defines the tendency towards adoption of crypto culture, may have started in earnest, albeit the risk concern.
As the naira became increasingly volatile and undermined by uncertainty built around the future of foreign currency-denominated banks accounts, some of the crypto non-believers middle-class are also signing up to sign up a digital wallet to warehouse their wealth in privately-issued stablecoins.
Checks by The Guardian at the weekend suggested that the practice, which was growing into a new culture last year during the height of the currency crisis, has subsided.
Yet, those who are conversant with the trend said that aspect of the chain has been tested and might never die.
A property broker told The Guardian he would always be a friend of USDT even though he may never trade in risky coins.
“From there, users can send cryptocurrency to centralized exchanges for more trading options if they so choose,” it stated.
Usefultulips.org, an online algorithm that tracks real-time transactions on LocalBitcoins and Paxful has not updated its data in recent months. But the most recent record showed the growth of participation from Nigeria has been phenomenal and even increased after the CBN ban.
For instance, LocalBitcoins and Paxful pooled a total of $32.5 million from the country in March 2021 as against $21.9 million realised in February, when the ban took effect, and $18.4 million invested in January. In January 2016, the total investment transacted by Nigerians through the platforms was $6,035 million.
The volume of Nigerians’ investment in the 12 months ending in March last year was $398.5 million. In sub-Saharan Africa (SSA), Nigeria was followed by Kenya with $144.5 million total transactions in the same period.
This content was originally published here.
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