South Africa is the biggest forex market in Africa. To put this into perspective, South Africa’s daily trading volume is $2.21 billion, which is a far cry from Nigeria’s $314 million daily turnover. Moreover, the average customer deposit in SA to South African forex brokers is $742, while in Nigeria, deposits average $514.42.
That said, you would expect the two countries to have a similar appetite for bitcoin. Well, that is not the case. While Nigerians have adopted bitcoin massively, bitcoin popularity is not as much in South Africa.
Why is Forex more popular than Bitcoin in South Africa?
According to Paxful data, Nigeria is the second biggest bitcoin market globally, only second to the United States. Nigerians have traded about 60215 bitcoins in the last five years totaling about $566 million. The country has recorded a 19% volume since 2017. On the other hand, South Africa ranks 10th globally with a total volume of $18 935 812 in the same period.
The big question is why bitcoin is not widespread in South Africa like in Nigeria. Below are some of the main reasons. Let’s delve right in.
The Government Is Clamping Down On Crypto Users
The South African Revenue Services has sent taxpayers audits requesting the cryptocurrency holders to disclose their activities. This move is meant to crack down on non-compliant cryptocurrency traders. In fact, the authority has also continually warned investors against the danger of cryptocurrency.
Recently, the authority sent a warning statement after cases of lost savings through crypto scams. The Financial market regulator seeks to have a greater oversight role following the fraudulent activities, including the bitcoin-based Ponzi scheme.
Bitcoin Trading is Relatively Riskier than Forex
Their bitcoin craze is without a doubt pushing bitcoin prices to all record highs. The price of bitcoin is hovering around an all high $42 000. Even with the rising demand, bitcoin comes with a massive risk that one country’s regulations can’t address.
The first risk is the integrity of bitcoin systems. Bitcoins are computer protocols that use sophisticated cryptography to create digital tokens. The integrity of this protocol relies on independent computers that run the protocols.
The most risk emanates from the potential nefarious uses. For instance, digital currency is widely used in the darknet and evading sanctions. Also, the bitcoin system has inherent security vulnerabilities. This system trust lies solely on computer code eliminating the banks, government, and other institutional gatekeepers. There are no third parties to mitigate potential harm. In 2016, cybercriminals used a bug to steal $50 million worth of Ethereum.
Crypto Exchanges pose yet another security challenge. These exchanges act as cryptocurrency gatekeepers allowing users to change bitcoin and fiat money. The risk that they are loosely unregulated in most countries. While cryptocurrency has not yet tanked, the dependence on opaque digital assets and a shallow pool of liquidity poses a serious risk.
Small Market capitalization
The forex market volume is over $6 trillion while bitcoin market is just about $600 billion. While the market cap of bitcoin has skyrocketed in recent months, the market size is relatively small and highly vulnerable to manipulation. The big market players use the pump and dump scheme to inflate the prices of coins that lack liquidity.
Bitcoin Is A New Technology
Forex markets have been around for decades since the advent of currencies. It emerged after the invention of the gold standard. Later on, the US dollar became the world accepted reserve currency.
On the other hand, bitcoin is just 11 years old. Over the years, scholars have explored the forex market, writing numerous materials and studies on the forex market. Plenty of information is available, ranging from trading psychology, trading strategies, and market analysis. On the other hand, bitcoin information, including its origin, is quite vague. As a result, many shrewd are skeptical about bitcoin trading and prefer to watch it from a safe distance.
Bitcoin Prices are Easy to Manipulate
Here is an interesting point. Forex trading is the biggest market in the world. This means that people will exchange currency for one reason or the other. The market boasts of massive liquidity, attracting both individual and institutional traders.
Bitcoin is an opaque asset characterized by shallow pool liquidity that is easy to manipulate. It also lacks institutional safeguards. While investors are free to speculate in the crypto market, many traders avoid the potential bubble burst.
The forex market can be quite volatile. The price movement is determined by political and economic news. International relationships and the economy significantly affect trading. Besides the charts and graphs, forex traders also look at the current global conflict, economic cleaners, and GDP reports.
Cryptocurrencies, on the other hand, trades through trade through exchanges. This trading regulation varies from one country to another. Regulations aside, supply and demand and media perception also affect cryptocurrency prices significantly.
Success Stories in South Africa
South African forex traders are some of the richest in the continent. Their big lifestyles influence aspiring traders to start trading. Many people in the country are attracted by the success stories making forex trading pretty much more popular than bitcoins. Nevertheless, bitcoin is also picking pace in the southern African country.
Forex trading offers more stability and liquidity, while cryptocurrency is a high-risk, high reward opportunity. While South Africa is the biggest forex market in Africa, it ranks third after Nigeria and Kenya in bitcoin trading. However, like other countries, bitcoin adoption has grown significantly in the country. With the government tightening regulation on crypto, the growth of bitcoin trading in South Africa is a wait-and-see situation.