Nigerians jilter as crypto prices bottom out

By Joseph ‘Afamhe

MILLIONS of Nigerians who throw their hard-earned money into the cryptocurrency market during the recent mania are currently licking their wounds as the asset prices continue to record new lows daily.

This afternoon, the flagship cryptocurrency, Bitcoin, was $400 short of tasting $30,000, the lowest since January when the recent ‘ultra-rally’ started. The price had dropped to $31,000 on June 8 before the recent short-lived bull that took it to over $41,000, a rare high since the ongoing dumping.

On April 1, Bitcoin hit an all-time high of $64,854 per coin, drawing global attention to the unbelievable fortune it has brought to the early birds who stockpiled the asset at less than 50 cents per coin about 11 years ago when little was known about it.

The bull run came at a time the Central Bank of Nigeria (CBN) called off the financial system romance with the extremely volatile market, directing money deposit banks (MDBs) to steer clear of the transactions.

But Nigerians who were, by the regulatory directive, drawn to the fortune-making possibility of the assets started stacking their resources, leveraging the peer-to-trading platforms, which matched buyers with sellers to enable them to exchange money and coins without any suspicion from the banks. 

While many Nigerians have, indeed, made lots of money from the market, Naija Times learnt that the latecomers, who bought when the prices were at the peak, are in the majority. Many, it was learnt, withdrew their savings while others took loans to put into the market after listening to the testimonies of those who have experienced financial success through what has become a game of chance.

A woman, who invested N600,000 rent handed over to her to keep by her husband, said she could barely realise N200,000 if she liquidates her investments. She regretted listening to her neighbours who she said had played in the global asset class three years before she joined last April.

Amidst regret, though, the old investors have continued to pour in money, saying cryptocurrency market switches from the pump to dump and that the current bearish trend merely separates the real investors from others.

Gideon Akpa (not real name) is currently building a gas plant at Ibafo, a community in Ogun State. She narrated how he has built his wealth from scratch from the market, adding that nothing would stop him from buying cryptos as he has done no other business since he graduated from university.

“The newcomers can back down but not somebody who has made millions of naira from it,” he noted.

Indeed, investors are tasting the moment of truth. Any investment market is a cycle of boom and bust and the crypto market, a wide swing ‘business’ is going through a moment of lull, which has defined its growth trajectory.   

In just six weeks between – April and May – bitcoin, which had controlled over 50 per cent of the market capitalisation that hit $2.5 trillion in April, plummeted from a record high to less than half its value, in a price crash that some commentators have labeled the “Great Unwind”.

The all-time high had followed a succession of new price peaks that saw bitcoin rise from below $5,000 in March 2020 to more than $64,000 by April, amidst growing optimism that it was headed towards $100,000 before June. But here is June, and the asset believed to be the most stable is heading back to its pre-bubble price. Other coins among over 4,000 in existence have similarly lost between 50 per cent and 90 per cent of their value in the past weeks.    

But it is not the first time coins (as they are often described by the addicts) would unwind in a manner that sends jilters and raises the blood pressure of holders. Amidst the Covid-19 fear last year, it lost 61 per cent. In 2018, it lost 84 per cent and 30 per cent in November 2017 while 40 per cent was wiped out two months earlier. As far back as January 2021 when bitcoin was a few dollars, it lost as much as 43 per cent. Since then and in 2017, it had lost over 80 per cent in massive dumping that was only followed by a new high.

The asset has ‘successfully’ crashed through a market pattern known technically as a death cross as opposed to a golden cross. Death cross, derived from statistical patterns, refers to when the investment asset’s 50-day moving average (MA) crosses its 200-day MA, and is used by some analysts as a sign that a long-term bull market is finally over. Notable death cross events in other markets include the Wall Street Crash of 1929 and the 2008 Financial Crisis.

Yet, analysts are sharply divided over the outcome of the current pattern formed by the market. Some see it as a blip, a kind of price correction that will mark the beginning of a new rally towards a new high while others think it is the beginning of a long bearish trend.

Whatever the position one holds, history suggests that a downtrend herald rally. Previous death crosses in 2019 and 2020 resulted in considerable price gains in the following months, with the one in March last year coming right before a market rally that saw bitcoin shoot by more than 1,000 per cent over the next year.

But while the market awaits the next crazy rally unknown to other investments, Nigerians who have lost their money in the troubling tumbling of prices may need some support to get going or do something silly.