Think bitcoin is getting expensive? Try Zimbabwe

For most investors around the world, bitcoin is a volatile and highly speculative bet. For Zimbabweans, however, the cryptocurrency seems to offer rare protection from the onset of hyperinflation and financial implosion. Some are turning to bitcoin out of desperation as their bank deposits lose value almost by the day, while others are using the online currency for housekeeping such as funding family members studying abroad. The result is startling. Bitcoin’s global surge to a record high of $7,888 last week — a sevenfold increase since the start of the year — has been spectacular enough. But on Harare’s bitcoin exchange, Golix, the price hit $13,900, a 40-fold jump in the same period. Warnings abound internationally that bitcoin may be a bubble waiting to burst. But the dire state of the Zimbabwean financial system under President Robert Mugabe is encouraging risk-taking. “I have now changed all my reserves to bitcoin because that is the only way I can protect my investment,” said Arnold Manhizwa, who works for an IT and telecoms company in Harare. The government adopted the US dollar in 2009 after a bout of hyperinflation rendered the Zimbabwean dollar worthless, wiping out savings in the now defunct national currency. After a period of relative stability, acute shortages of dollar cash have set in, leaving Zimbabweans with electronic units in their bank accounts which are officially called dollars but have a far lower — and rapidly decreasing — value. In January if they wanted to buy $100 in cash they had to transfer $120 out of their account to a seller on the parallel market. Now the price is $180 in what are nicknamed “zollars”. Nearly all domestic transactions are made via debit card or transfers using mobile phones. But some economists estimate inflation is more than 50 per cent a month in zollar terms, far from the official, dollar-calculated rate of 0.38 per cent. Zimbabweans are therefore piling into anything they think might retain value. Prices of cars, real estate and stocks have all soared, with the Harare bourse’s main industrial index doubling in the last two months. For people like Manhizwa, a 34-year-old father of two, bitcoin is almost a safe-haven asset. “If I have $500 in the bank I won’t get it back and I will be losing value, but when I have my bitcoin it is going up every day,” he said. — Reuters