A surprise political move by Zimbabwean president Robert Mugabe, who fired his deputy Emmerson Mnangagwa, has played havoc on the US dollar/bond note parallel exchange rate, as well as on Bitcoin price in the country.
Bitcoin was already trading at a highly inflated rate in the troubled African country as its demand skyrocketed as a potential alternative to the dregs of a currency that Zimbabwe has left. However, that inflation has hit almost 100 percent as it trades about $13,000 per coin.
Trading on uncertainty
Unsurprisingly, with this latest political coup by the entrenched president, there is much speculation and worry about the already fragile and almost non-existent fiat currency system. Zimbabwe operates on bond notes linked to the US dollar.
Traders have been trying to move out of monetary assets as even on the dollar there is a 62 percent premium. It has meant that investors are trapped by the currency shortages, seeking an alternative to exit the country – such as Bitcoin.
Despite hitting a price of over $13,000 traders say that Bitcoin is booming as it is the strongest alternative.
Collapse of banking
Zimbabwe is beginning to act like an interesting case study for what happens when a country begins to collapse around its monetary system – it is also being witnessed in Venezuela.
Moving money out of Zimbabwe is starting to become impossible, and as people try and flee monetarily out of the crumbling state, they are finding refuge in Bitcoin.
Soon, banks in Zimbabwe have stated that Visa debit cards would no longer be usable for international payments without prior arrangements and pre-funding with hard currency.
“You will be required to make prior limit arrangements with the bank,” Stanbic said in a message to depositors last week. Econet Wireless has also stopped foreign payments on its MasterCard linked EcoCash mobile money debit card.
Bitcoin as a refuge
Because of the decentralized nature of Bitcoin, there is no impact on it from this political upheaval, in fact, it is only benefiting from it. The Bitcoin premium of almost 100 percent is not because of the political issues, rather the high demand surrounding worry of collapse.
Bitcoin again shows its potential and power when the banking system again shows its potential for mass collapse and hysteria.