Since its peak in 2021, cryptocurrencies have lost $2 trillion in value.
There has been a 70% drop in the price of bitcoin since an all-time high of over $69,000 in November. As inflation continues to rise, many leading altcoins have also dropped more than 60%, including ethereum (ETH) and Cardano (ADA), and polygon (MATIC).
Although the market has regained some stability, it shows no sign of returning to its highs soon. There are still many high-profile issues, and the downward spiral is predicted to continue.
Many experts have warned that the crypto market could undergo a prolonged bear market, also known as a crypto winter.
At the same time, Chainalysis reports that cryptocurrency payments have increased 1,200% from 2020 to 2021 in Africa.
They also rank Kenya, South Africa, and Nigeria among the world’s top 10 cryptocurrency users and found that Africa leads the world in the share of overall crypto transaction volume from peer-to-peer.
Many other recent studies have highlighted the continent’s growing adoption rates of cryptocurrencies, Web3 employment, and DeFi structures, but little has been devoted to how the crypto winter impacts Africa.
In any case, the industry’s decision-makers, influencers, and traders continue to play an essential role in its future. Speaking to four individuals in Africa, they said:
Meet Miss Purple, a current affairs news reporter, Web3 podcast host & newsletter editor for Bankless Africa. She also works as a project moderator/community manager for Super Geisha, Colourful Rebels, and Everdragons 2 & Galverse. She serves as an NFT-backed project co-founder & writer for Monahano NFT.
When asked about how the crypto winter will affect Africa, Miss purple explains, “I think in a strange way it has and will continue to strengthen the resolve of many. The past crypto’ summer’ or ‘bull market’ as commonly called, has shown the people what is possible regarding financial gains and space for innovations. I think this winter period will see many more Africans curious to understand what this is about before it all rallies again.”
However, she is concerned that it could create a lack of innovation. She believes many people will leave the entire crypto market because they lost too much or could not keep up with the speed of it all. “The fact is that a lot of Africa’s crypto users came in looking for a financial breakthrough of some sort, the current market almost directly affects crypto, which then directly affects the financial revolution that so many are desperate for.”
However, she cites the continent’s tenacity as more critical and that this might be a significant stepping stone to its success.
“Africa has seen the worst of the worst, and this current state of the market could be a time for us to make the best of our lower costs of living to do what other users in other countries may not be able to do at this time because of the costs found in their respective countries. This could be our time to show off our resourcefulness and come out on top.”
Outside of the crypto winter, her concerns are not related to the bear market but fraud.
“Without question, what worries me the most is that there are new people who have been and continue to be lured into the space under pretenses. It hurts me when I see people who have invested their savings and hard-earned money into crypto through a malicious bad actor who gains their trust only to run off with their money or something more sinister. I think risk management is not something we know how to do on a large scale in many parts of the continent. I hope this changes in the next market cycle, so we can survive and thrive in the innovation arenas of the crypto space.”
She points to the need for education informally and formally and that this will also reduce the number of people who fall victim to scams & Ponzi schemes.
Miss Purple shows tremendous optimism when it comes to the future of the continent.
“The future is extremely exciting, with countries like the Central Africa Republic adopting bitcoin as legal tender and South Africa looking to regulate crypto officially. The continent is quickly adapting to life in the space. Countries like Namibia offer students the opportunity to front-run the academic side of blockchain technology with their Master’s Degree. There is so much that Africa is doing and can continue to do with this technology to solve the socio-economic issues better than ever before. Of course, this will all come at a cost Africa has never been allowed to innovate without there being some sinister characters looking to keep them suppressed; at this, it will be hard for us, but the power of the blockchain is that the code is the law and that in my opinion is how we become the greatest.”
She specifically mentioned NFTs and social tokens because of their potential in community building and acting as a capital fundraising as a place to be explored.
Exploring the use of the blockchain for identification, remittances, pension payouts, and Universal Basic Income initiatives is also on the agenda.
To conclude, Miss Purple says, “the crypto/Web3 space is here to stay the potential to change the trajectory of our lives, and the continent’s capabilities are insurmountable. Africa can be a leader of this renaissance.”
Andrew Fassnidge connects people in crypto and DeFi in Africa through industry Summits such as the Africa Money and DeFi Summit and Africa Tech Summit editions in London and Nairobi. His role is to connect ventures, platforms, and investors to drive business and investment.
Fassnidge thinks there are a few sides here to look at across Africa, such as P2P, ventures, and investors, when it comes to the crypto winter.
“While there has been a rapid loss of wealth for many speculators who timed it wrong over the last couple of months, many P2P transactions are largely unaffected. I think this will continue to foster trade and payments with the devaluation of many fiat currencies and rapid inflation such as with the Naira.”
He has also seen rapid growth in new ventures creating and building new services using crypto rails, regardless of the downturn. Fassnidge notes that DeFi founders across Africa are incredibly bullish, and investors are working hard to get into deals.
However, he has some concerns about SMEs.
“Often small investors get burned with little safeguards for them, of course, it is not regulated a general lack of clarity creates this environment, and needs to be addressed globally.”
While that is the case, like Miss Purple, he believes long-term gains will be positive, particularly in the venture capital industry.
“I am seeing huge growth of products and companies building on crypto rails, so we will see it ramp up across the continent as new crypto infrastructure is being built. Increased on and off ramps will drive the proliferation of new services through mobile money and other means.”
Fassnidge also discussed an interesting correlation between remittances and crypto.
“Consumers crippled with exorbitantly high charges for remittances and transfers, increasingly trusting crypto to send and receive money globally as they are tired of being overcharged.”
Remittances are a crucial area to examine as, according to World Bank, remittance inflows to Sub-Saharan Africa returned to growth in 2021, increasing by 6.2% to $45 billion.
As far as crypto is concerned, Fassnidge, like Miss Purple, believes Africa’s future is bright.
“Overall, I think adoption will grow massively. Huge opportunities to invest in a new wave of Web3 businesses and ventures that didn’t exist before. These are solving real problems that existing financial services don’t serve or at the expense of people who can least afford them, so big DeFi opportunities.”
Elisha Owusu Akyaw
Elisha Owusu Akyaw is a Social Media Specialist at Cointelegraph.com and a cryptocurrency educator pushing for adoption in Africa. He also was the former business development manager for Binance in Ghana.
Like Miss purple and Fassnidge, Akyaw believes the cryptocurrency downturn may not be as bad as many think for Africa.
“Every time the markets go down, the noise reduces, allowing innovations some breathing space to operate. But the biggest opportunity comes from more people entering the cryptocurrency space from developing economies. Prices are low, and the monetary barrier of entry has lowered exponentially.”
However, he does have some concerns related to market exploitation.
“Crypto winter comes with Fear, Uncertainty, and Doubt (FUD). People use the market cycles to call the entire industry a scam or a bubble. It was extremely popular in past bear seasons and still happens today. However, such stories have lost their impact as people have begun to understand the space and recognize the innovation happening here.”
Long term, he sees the outlook as bullish.
“Everyone who cares about their future will move to cryptocurrencies as several state currencies continue to lose value and fail citizens. Cryptocurrency will replace traditional financial alternatives for major intercontinental transactions. Cryptocurrency fixes many problems that make trade between African states impossible.”
Thus for Akyaw, he sees many opportunities in the space. Despite the infrastructure needed for mass adoption that is yet to be built or perfected. He looks at how crypto gives everyone access to a vast digital economy with many opportunities.
Many Africans are working remote jobs in crypto, which is set to continue as more people acquire skills and traditional jobs remain scarce.
Lastly, meet Tami Koroye, a Ph.D. student studying the regulation of cryptocurrencies and other digital currencies.
They are also the Editor of the ‘Next Crypto Frontier,’ a vertical focused on the crypto-ecosystem in Africa. This vertical is part of ‘The Continental Approach,’ an online media company focused on young Africans.
Regarding the crypto winter, Koroye believes the effect on Africa will be no different from the rest of the world.
“The crypto winter can lead to loss of investments and forced financial crunch for Africans who own tokens. Will it, however, lead to immeasurable financial damage? The answer is no. Will it make Africans stop using crypto? The facts prove otherwise. The crypto market is highly volatile, especially with the rising altcoins in circulation. However, the technology and use cases are relatively new, compared to traditional financial assets, and are constantly evolving to attain a more sustainable state.”
He points out that traditional financial assets and currencies have led the world to multiple global financial crises, negatively impacting Africans.
“High numbers of financially excluded Africans, failure of the banking credit system, draconian governments, and difficulty in cross-boundary payments are some of the reasons Africans adopt cryptocurrencies, and until those issues are addressed, I do not see this adoption slowing down. “
Despite this, Koroye shares concerns regarding the fluctuation of altcoin values and how that can affect Africans who recently joined the crypto-ecosystem.”People might leave thinking it is all a fad.”
As an example of the future and opportunities in Africa, Koroye points to the Central African Republic making bitcoin legal tender, an instance of its vibrant ecosystem and unique infrastructure.
“The future, as I see it, is that cryptocurrencies will play a greater role in decreasing the financially excluded margin in Africa and attain a more mainstream perception in the financial sector. African countries are either creating or testing the creation of central bank digital currencies; I believe Africa will set the blueprint of a new financial system where cryptocurrencies, fiat, and central bank digital currencies are options available to Africans participating in transactional/financial activities.”
Helen Femi Williams is a freelance journalist and podcaster interested in fintech, politics, economics, and their intersections.
She is the host of the letsgetlitical podcast, a fortnightly show interviewing guests from all different sides of the political spectrum, in partnership with the Mozilla Foundation.
Prior to this role, she worked as an innovation consultant developing insurtech and fintech products and ideas for brands, startups, and major corporations.
She studied International Relations at the University of Nottingham (UK and Malaysia).