For the past few weeks, a wind of panic has been blowing over cryptocurrencies. Bitcoin has lost half its value in a few days and this does not make the millions of savers and speculators on the African continent happy. For example, an estimated 11% of South Africans and 9% of Nigerians own cryptocurrencies. What are the dangers that cryptocurrency holders face, especially in Africa?
In high-inflation countries in Africa, cryptocurrencies are often seen as a way to preserve the value of one’s savings. In more monetarily stable areas, they are seen as a tool for speculation and enrichment. But the spectacular fall of Bitcoin in recent weeks reminds everyone of what for economist Daniel Ouedraogo is obvious.
“You have big volatility that reflects the importance of risk. So you can go from simple to double in a few days. So these are not safe assets. It’s an illusion to think that investing in cryptocurrencies is a safe investment,” he explained.
Prices are erratic because cryptocurrencies obey only one law, that of supply and demand. “Bitcoin is worth about a hundred times more than it was four or five years ago, but already half what it was a few months ago. It’s a price that moves erratically, so no one ever knows if it will continue to rise or on the contrary go down,” analyzes Jérôme Mathis, professor of economics at Paris-Dauphine University.
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Buyers of cryptocurrencies must be aware of one thing, their savings can disappear overnight
Moreover, in Africa, where cryptocurrency buying companies are flourishing, it is recommended to take some precautions.
“To be able to collect savings, you need to be licensed. And sometimes there are companies that collect savings without having the authorization and therefore illegally. So if you decide to entrust your money to a company to buy cryptos, the first thing to do is to check that this company has the authorizations to be able to collect the savings,” Daniel Ouedraogo detailed.
Cryptocurrency enthusiasts should also be wary of the risk of theft because while cryptocurrency is inherently tamper-proof, wallets are not. “Bitcoin is always presented as an extremely secure currency. That’s true, but around it, there are a lot of malicious hackers trying to catch the customer at the entrance or exit. The risk is in many places. Whether you use your computer or your cell phone, you can have your accounts hacked, and your cryptocurrencies stolen, warnsJérôme Mathis. And there are also the marketplaces on which you make your transactions, they are not always very secure either. When you have a bank account, if you ever get your account hacked, the bank has taken out insurance that reimburses you. For people who hold crypto-assets, if they get stolen, no one will reimburse them. There is not this insurance system that you can benefit from when you are lucky enough to have a bank account. “
Between theft and volatility, the use of crypto-currencies, therefore, involves risks that are difficult to minimize at the moment. However, the solution may come from Afro, one of the most promising pan-African cryptocurrency projects.
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First published in rfi, a third-party contributor translated and adapted the article from the original. In case of discrepancy, the original will prevail.
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