With all of the talk about volatile Bitcoin prices on the world market, there’s also an element that some analysts aren’t really considering in their day-to-day appraisal – that’s the black market, where premiums on cryptocurrency push prices up a lot more.
This morning, Marie Huillet at Cointelegraph is reporting on some extreme premiums on Bitcoin in South Africa and Zimbabwe, where a Bitcoin can allegedly sell for as high as $76,000. This, as she points out, is over 600% higher than its current fair market value of $10,000 and change.
Why would anybody pay that much for Bitcoin?
The back story here involves two things – unstable economies and the criminalization of cryptocurrency.
With Bitcoin being illegal in these countries, it makes sense that buyers will pay a premium. Then, in Zimbabwe, runaway inflation is causing failure of the country’s fiat currency, which pushes those with any net worth toward alternatives like crypto coins.
However, analysts are also pointing out technicals that can skew these numbers.
“This massive markup is actually just a reflection of the black market rate for USD held in EcoCash which have just been rendered virtually worthless by the government.” eToro’s Mati Geenspan told Cointelegraph.
The prices themselves may be distorted, but even without these kinds of duress, it’s not unprecedented to have a premium on Bitcoin prices. For instance, analysts talk about the “kimchi premium” paid in places like South Korea, partly just due to liquidity and availability (or the lack thereof).
Still, traditional common wisdom would be not to pay more than market price for any cryptocurrency unless there are significant mitigating factors.
Unfortunately for these daring African crypto investors, you can’t keep Bitcoins in your toilet tank, as 20th century currency speculators did with foreign money, fearing raids by national police – but there are abundant places on the dark web to store crypto, and coins like Monero that make their bones based on privacy and anonymity.
In your analysis of global Bitcoin prices, don’t forget to look at places where demand and supply outliers make Bitcoin worth a lot more than buyers will pay in the free world.