Crypto weekly update
23. February 2023  • clock 5 min •  Daniel Mitrovsky

Bitcoin as a Solution to Problems in Nigeria? – Cryptocurrency Market Overview (10.2. – 23.2.)

Over the past two weeks, the total market capitalisation exceeded €1.04 trillion. The increase in market capitalisation over a 14-day period is 5.36%. The price of Bitcoin has risen by 8.75% over the last 14 days to a current value of over €23,000. Bitcoin’s dominance is currently around 42.4%.

Source: Coinmarketcap

Bitcoin as a Solution to Problems in Nigeria?

The African state of Nigeria, with a population of more than 190 million, has been mired in huge financial problems for months. Problems related to cash shortages have left residents waiting all day at banks and ATMs to withdraw even a little money to cover essential living expenses. However, many leave sad and penniless. For this reason, the situation has escalated in recent days, and a wave of violent protests has erupted across the country, with angry residents attacking bank staff and demonstrators setting fire to the premises of financial institutions.

However, the problems are much bigger than they may become. The Central Bank of Nigeria has come up with a redesign of its banknotes, rendering the old local currency, naira notes, useless. With the redesign also came a weekly cash withdrawal limit of 500,000 nairas for individuals (about $1,087) and 5,000,000 nairas (about $10,087) for organisations from 9 January. To make matters worse, transaction and withdrawal fees from ATMs and POS have skyrocketed. Nigerians are forced to pay 2,000 to 3,000 naira ($4.3 to 6.5) for every cash withdrawal of 10,000 nairas ($22) through POS. Moreover, most banks and ATMs still do not have the cash to dispense despite the restriction on withdrawals and currency redesign.

However, the complicated situation related to Nigeria’s domestic currency shows the positive side of BTC possession by locals. The demand for Bitcoin in the country is so huge that Bitcoin is currently trading there at a 60% premium to a price of around $38,000 per Bitcoin. However, the global market price of Bitcoin is currently around $23,000. So many are asking – why Bitcoin?

One of Bitcoin’s fundamental attributes is its resistance to censorship. This means that it is not tied to any central authority or institution that has control over Bitcoin and can control it. This feature is being realised by more and more Nigerians who see Bitcoin as an alternative to the domestic currency, which is currently facing huge problems.

Furthermore, Bitcoin offers residents 24/7 access to their funds without restrictions. With Bitcoin, there is no need to wait for days at the bank or outside an ATM waiting to see when and if I will ever get my money. Therefore, Bitcoin offers financial sovereignty for locals and 100% accessibility and control over their funds.

Moreover, Bitcoin’s monetary policy is set up to address one of the biggest problems of traditional currencies – inflation. Nigeria’s inflation rate has risen sharply in recent months, reaching as high as 23% in January. Bitcoin’s property as a store of value and hedge against inflation is currently protecting locals from the negative impact of the country’s rising inflation. Source

Genesis and Gemini Reach Agreement

After weeks of tension, Digital Currency Group (DCG), Genesis Global and Gemini appear to have reached an agreement on a possible restructuring plan.

Bankrupt crypto lending company Genesis Global has announced that it and its parent company Digital Currency Group have reached an agreement in principle with its creditors, which include crypto exchange Gemini. According to a press release, the agreement means that DCG will exchange $1.1 billion of debt securities due in 2023 for convertible preferred stock to be issued under Genesis’ bankruptcy plan. DCG will also refinance its existing 2023 term loans through new term loans issued in two tranches (one dollar-denominated, the other bitcoin-denominated), totalling approximately $500 million.

In addition, the agreement requires Digital Currency Group to contribute its equity interest in Genesis Global Trading (the trading arm of Genesis) to Genesis Global Holdco (the cryptocurrency lending business that declared bankruptcy on 19 January), effectively combining all of the Genesis entities into a single holding company.

In turn, Gemini, Genesis’ largest lender, has agreed to use $100 million to ensure that Gemini Earn users fully recover their funds. Genesis and Gemini jointly launched the Gemini Earn program in December 2022, which offered Gemini customers the opportunity to lend their crypto assets to Genesis and collect interest in return. After Genesis’ collapse and a freeze on withdrawals, Gemini founder Cameron Winklevoss accused Genesis of owing Gemini Earn customers more than $900 million.

However, the information about a possible deal is a positive step toward solving Genesis’ liquidity problems. However, the agreement is still subject to court approval. Source

Amount of Dormant Bitcoins Near All-Time Highs

The amount of idle Bitcoins, which have not moved from their addresses for more than six months, is once again approaching its all-time high.

According to on-chain analytics company Glassnode, the metric for the number of bitcoins that have not moved from their addresses in at least six months has reached 14.99 million BTC. At current price levels, that’s roughly $370 billion in bitcoins that are idle, representing as much as 77% of Bitcoin’s total circulating stock. Glassnode adds to this metric that it is possible to observe a sort of cycle turn and a significant change in investor behaviour.

Addresses from which BTC has not moved for more than 155 days are effectively being reclassified from STH (Short-Time Holders) to LTH (Long-Term Holders) and are less likely to be spent. Glassnode also adds that similar behaviour by BTC holders has been seen during previous bear markets, which may indicate that the market is already cleared and ready for a recovery.

According to another analyst firm, Arkham Intelligence, this behaviour is related to bitcoin holders refocusing on long-term gains. According to the company, the bitcoin investor community has become long-term oriented and is primarily focused on holding BTC for the long term.

The Bank for International Settlements released a report on Monday concluding that investors who profit from buying and selling cryptocurrencies are most often those who have held bitcoins for a long time and are sufficiently market-oriented to gauge when it pays to sell their BTC before a significant decline.

However, according to the BIS report, the majority of BTC investors only entered the market during the advanced stages of the bull market, when the price of BTC was high, and these investors subsequently sold their investments at a loss during the bear market. Source

Mastercard to Enable Crypto Payments in Web3 Space

A new partnership between payment protocol Immersve Web3 and payment giant Mastercard will allow users of Web3 crypto wallets to pay for goods and services directly via cryptocurrencies.

The partnership uses decentralised protocols to settle cryptocurrency transactions in real-time at outlets accepting payments through Mastercard online. Users will thus be able to use their existing Web3 wallets to make direct crypto payments without having to rely on third-party services. Users will be able to access this feature through their wallets and use their private keys to approve payments.

Mastercard is no stranger to the cryptocurrency sector. The company has entered into several interesting partnerships in the past, including an initiative between Mastercard and crypto exchange Binance to launch Mastercard prepaid debit cards in Latin America.

Over the years, Mastercard has fostered a number of partnerships to stay relevant in the crypto ecosystem. One of the most recent initiatives was Mastercard’s partnership with crypto exchange Binance, in which the two companies jointly launched Mastercard prepaid cards in Brazil. The card allows users to convert crypto-fiat in real time and supports the conversion of up to 14 crypto assets. The card also offers users up to 8% cashback in cryptocurrencies on eligible purchases and zero fees on ATM withdrawals when certain conditions are met. Source

European Union Discusses Use of Zero-Knowledge Proofs for Digital ID

The European Union is well known for its bilateral relationship on privacy. On the one hand, it has the first place in the world in introducing strict data protection rules. On the other hand, the public has criticised its Central Bank Digital Currency Project (CBDC) for several shortcomings, mainly related to anonymity and data protection.

Despite this, EU lawmakers took a significant step forward in their efforts to achieve the highest possible privacy protection for Europeans’ digital identities last week. Last week, the Committee on Industry, Research and Energy included the Zero-Knowledge Proofs standard in its amendments to the European Digital Identity (eID) framework.

Although the document is still not publicly available, a press release states that EU citizens will have full control over their data and can decide what information they want to share and with whom they want to share it. The new eID would allow citizens to identify and authenticate themselves online (via the European Digital Identity Wallet) without having to share any sensitive data with third-party entities.

A paper on the possibility of linking Zero-Knowledge Proofs to the European eIDAS has reportedly been worked on by the Mina Foundation, the German bank Hauck Aufhäuser Lampe and the Interdisciplinary Centre for Security, Reliability and Trust at the University of Luxembourg. Source

Hong Kong Unveils New Licensing System

On Monday, the Hong Kong Special Administrative Region of the People’s Republic of China published new draft rules regarding the possibility of allowing retail investors to trade certain higher market-cap cryptocurrencies on licensed exchanges. Many experts see the move in stark contrast to China’s approach to cryptocurrencies, where any cryptocurrency-related transactions are completely banned.

The proposal on the table stipulates that any centralised virtual currency exchanges operating in the city or marketing services to investors in the territory must obtain a license from the Securities and Futures Bureau. The licensing requirements cover all key areas such as safe custody of assets, know your customer (KYC), cybersecurity solutions, cryptocurrency accounting and audits, or anti-money laundering/counter-terrorism financing and risk management.

The city’s Securities and Futures Commission has not yet specified which “higher market cap cryptocurrencies” will be allowed. However, a spokesperson for the regulatory body said it is likely to be Bitcoin and Ethereum, the two largest and most popular cryptocurrencies on the market. Hong Kong, which has historically been seen as a major financial centre, could potentially become a sort of research hub for Chinese policymakers to test the potential of blockchain. Source

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Daniel Mitrovsky


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