Why Zimbabwe’s Bitcoin Premium is Not a Good Arbitrage Opportunity: Expert Opinion

Mati greenspan
Mati Greenspan

Why Zimbabwe’s Bitcoin Premium is Not a Good Arbitrage Opportunity: Expert Opinion

The economy of Zimbabwe is going through a tectonic shift as the country is witnessing a drastic change again in less than 11 years. The currency of Zimbabwe declined in 2008 due to hyperinflation. The people started to use South African Rand and US dollar instead.

Reportedly, in 2008 a loaf of bread cost trillions of Zimbabwe’s currency. This was a disastrous phase that drove the country back to the barter system of trade.

On Monday 1st July, the Reserve Bank of Zimbabwe removed US Dollar and South African Rand from its list of legal tenders. This is being done to promote the use of their native currency, the RTGS$ which will be termed as the Zimbabwe dollar. However, the citizens in the country seem unhappy with the decision.

Furthermore, this economic decision has had a considerable effect on Bitcoin prices in the country. One of bitcoin’s core value propositions is the ability to provide a store of value that is completely segregated from your local economy.

The reported price of Bitcoin in Zimbabwe was as high as $76000. This is 7.5 times higher than the rate in international markets. Hence, it opens up an opportunity for arbitrage. However, Before you book a flight for Harare and a 5-star hotel, please know that these figures are misleading.

This is primarily due to the demand to move from the USD. The Ecocash App is popular in Zimbabwe, which is used to hold the US Dollar. No doubt, after the government abruptly made trading in USD illegal, many locals will be trying to offload their EcoCash holdings in any way possible.

Hence, the demand is so high that there might be considerable margins imposed over it as well. While there is a significant difference in the price. But unless you have a contact at a Zimbabwean bank who can exchange EcoCash for USD at the rate of the day, the margins probably won’t be worth the trip.

Do you agree with our expert opinion? Please share your views with us. 

Summary
Why Zimbabwe's Bitcoin Premium is Not a Good Arbitrage Opportunity: Expert Opinion
Article Name
Why Zimbabwe's Bitcoin Premium is Not a Good Arbitrage Opportunity: Expert Opinion
Description
The economy of Zimbabwe is going through a tectonic shift as the country is witnessing a drastic change again in less than 11 years. The currency of Zimbabwe declined in 2008 due to hyperinflation. The people started to use South African Rand and US dollar instead.
Author
Publisher Name
CoinGape
Publisher Logo
Coingape is committed to following the highest standards of journalism, and therefore, it abides by a strict editorial policy. While CoinGape takes all the measures to ensure that the facts presented in its news articles are accurate.
Disclaimer The views, opinions, positions or strategies expressed by the authors and those providing comments are theirs alone, and do not necessarily reflect the views, opinions, positions or strategies of CoinGape. Do your market research before investing in cryptocurrencies. The author or publication does not hold any responsibility for your personal financial loss.
Author: Mati Greenspan

Mati Greenspan is the Senior Market Analyst at eToro, a global social trading and investment platform. Mati is a licensed portfolio manager in the European Union and his main focus is on macroeconomic analysis, portfolio diversification and cryptocurrencies. Follow him on Twitter at @matigreenspan

Post your comment...
Mati Greenspan 45 Articles

Mati Greenspan is the Senior Market Analyst at eToro, a global social trading and investment platform. Mati is a licensed portfolio manager in the European Union and his main focus is on macroeconomic analysis, portfolio diversification and cryptocurrencies. Follow him on Twitter at @matigreenspan

Follow Mati @