I don’t know anyone I could stay with in London. It is an expensive city, and no one goes about staying in houses with extra rooms. It will even be rude to call them up late in the middle of the night that I was coming to bunk with them the following day. Not in this time and age where everyone stayed on their lanes.
Not a problem. I hooked up my laptop and went to Expedia.com, where I normally booked hotel rooms whenever I wanted to travel outside the country. I got a hotel room, which was just 7 minutes drive and 20 minutes walk from my school, and it was time to pay. I used my normal Diamond Bank credit card to pay, and bam! Error in payment! Okay. This is Nigeria where people go around with more than one phone and at least two debit/credit cards. I tried GTB, same thing. I was sweating already. I tried Standard Chartered Bank. Same thing.
It was already 11.30pm.
No! This cannot happen to me. Which account officer will I call in the middle of the night? I called GT Connect, and they told me the amount I wanted to pay was above my daily limit. I called Diamond bank, and they said they were not doing US dollars transaction. See the problem CBN has put me into now! I asked my wife to lend me some money. She uses Access Bank. Same thing. I was stuck.
This is the problem the average Nigerian passes through whenever they want to do international transactions. Does that mean I have to look for mallam early in the morning when I am rushing to the airport and buy dollars at 6am? I had just enough foreign currency in cash to tide me over for two weeks in London, but not enough to book a hotel room for five days.
As I stared at the payment portal, I noticed the Bitcoin sign. I can pay with Bitcoin. Okay, I have another option. I brought out my phone, and fired up Whatsapp. I buzzed Peter, a close friend who knew everything about Bitcoin. It was already some minutes past midnight.
Peter walked me through the process of using the Bitcoin Blockchain wallet on iPhone. He transferred $1.00 to me and then hooked me up with someone who traded Bitcoin. I buzzed the person, also on Whatsapp. Within a few minutes we sealed the deal for the exact amount of money I needed to pay the hotel room. In Bitcoin. I transferred Naira to him and he transferred bitcoins to me and I paid Expedia and sealed the hotel room.
It took less than 30 minutes between the time I buzzed Peter and the time I paid for the hotel. By 12.45am, I was in bed. The CBN and Nigerian banks had locked down foreign currency transactions because of poor availability of dollars, but Bitcoin came to the rescue.
This is the difference between a tightly regulated market and the one that is allowed to function according the the laws of supply and demand. Over-regulation, as seen with currencies even down to the the US dollar, always leads to unintended consequences. The more regulated a currency is, the more volatile it becomes. The more CBN clamps down on international transactions, the more volatile the Naira becomes.
Let me put this bitcoin thing in perspective. The Nigerian foreign reserve is around $25 billion. As at the time of writing this, the total bitcoin available in the world was just about $9.6 billion. That means Nigeria can just vex one day and buy up all available bitcoin. Theoretically. Meanwhile, bitcoin is available whenever and wherever you need it in the world, but dollar is not easily available in Nigeria for international trades and transactions.
Bitcoin is not regulated. It is a currency developed by some tech-savvy people. I was initially under the notion that I needed to understand what Bitcoin was all about before I started using it. But after my first experience of conducting a transaction with Bitcoin, I understood that I actually didn’t have to understand where US dollars were printed or how they were shipped to Nigeria before purchasing and spending it. The same thing applies to Bitcoin. I have no idea how it is created, other than it is mined by people who have heavy data processors and that the higher the price, the more profitable it is to mine and the lower the price the less profitable it is to mine.
All you need to use bitcoin is to download a bitcoin wallet on your phone or computer and then buy from people or from bitcoin exchanges. Bitcoin exchanges are places where people buy and sell bitcoin in exchange for fiat currencies. An example is www.bitstamp.com.
I am not going to go into the intricacies of bitcoin as an asset class, but only as a mode of transaction. There is no economic theory or pricing methodology to determine the true value of bitcoin. In simple terms, this means bitcoin is an extremely volatile asset whose value is dependent on the whims and caprices of the people who buy and sell the currency. There is nothing stopping the currency from gaining 500% overnight or losing its entire value in less than 5 minutes.
That was why the value dropped from about $670, at the time I booked the hotel room in London, to around $540 a few days later. This drop was as a result of a hack that was carried out on Bitfinex, one of the most popular bitcoin exchanges. Some coins were stolen and a lot of people lost a lot of money. This is one of the downsides of the currency. The best way to secure your coins, if you ever chose to venture into holding it, is to keep them away from exchanges. Store them on your phone, computer or devices, such as Trezor, that are designed to hold cryptocurrencies.
Bitcoin has recovered some its value and is currently selling at around $600. Yours truly bought some between $540 and $580. And I have no intention of selling them. It is my personal opinion that Naira is going to remain more volatile than bitcoin for a long while, and I have every intention of minimizing my exposure to the Naira to the barest minimum. I may be wrong, and I am sincerely hopeful that I am wrong. In any case, as at the time of writing this, anyone who bought bitcoin right after the hack would be up by 10% against the US dollar and up by 26% against the Nigerian Naira.
To avoid the volatile nature of holding bitcoin, you can use it as a mode of transaction. You can buy the currency and then use it to purchase goods and services like I did. If you like, you can also set up your business to receive payment in bitcoins and then sell them for fiat money as soon as possible. That way, you can minimize your exposure to its volatile nature.
In a new world where negative interest rates are the norm, and central bankers are doing unprecedented things in the search for economic growth, fiat currencies are going to be increasingly volatile. As the primordial instincts for self-protection kicks in and nations manipulate their currencies, cryptocurrencies are going to rise, led by the bitcoin, and we will be here as bitcoin take the center-stage in the much touted internet of things.
And for the avoidance of doubt, Bitstamp was given a license by Luxembourg’s Ministry of Finance a few months ago.
Op–ed pieces and contributions are the opinions of the writers only and do not represent the opinions of Y!/YNaija
This article was first published HERE. Manasseh Egedegbe tweets from @KnightofDelta