Though it is not clear the extent to which the weakening South African currency rand will go compared to what is happening in Venezuela, Bitcoin price in the country rose by almost 5% this week.
The sharp rise which happened in less than a day was a reaction to a National Prosecuting Authority (NPA) decision to charge Finance Minister Pravin Gordhan.
The announcement caused the rand, which was 3.43% lower at R14.27 to the dollar by late afternoon on Monday October 10 and 1 BTC = R8, 891 on BitX exchange by midnight, to rise to be 1 BTC = R9, 298 by 14:00 on Tuesday.
The price has changed slightly since then - going as high as 1 BTC= R9,499 on Wednesday - but stands presently at R9,353 on the same exchange as at the time of this publication.
Africa’s leading market for Bitcoin
Internet analyst Arthur Goldstuck told Fin24 that the Bitcoin price was also directly impacted by the exchange rate since the digital currency is purchased in dollars.
Unlike in Nigeria whose weakening currency could have been a better reference for fluctuating prices but for the low uptake of the digital currency in the country, the rise in price is quite obvious in the case of South Africa because it is Africa’s leading market for Bitcoin.
According to Fiatleak.com, South Africa records realtime Bitcoin transactions just behind China and the US.
The African country’s case is quite different from Venezuela’s whose inflation rate has been projected to hit 1,500% in 2017 as crisis goes from bad to worse.
Year-on-year inflation is expected to reach 700% this year, according to what Diego Moya-Ocampos, senior Latin America analyst at IHS Country Risk, told CNBC, and UBS forecasts it will reach 1,500% next year.
The collapse in oil prices in recent years which the Venezuelan economy heavily relies on resulted in a balance of payments problem. The grim outlook for Venezuela, according to Michael Henderson, lead economist at risk analysis firm Verisk Maplecroft, will lead to an inevitable macroeconomic reckoning.
If the latest LocalBitcoins record is anything to go by in relation to the economic situation in the country, weekly transactions in Bitcoin is at its all time high point in history - at B2,234,143 Bolivar (about $225,000) as at 8 October 2016. With the grim outlook of things till next year, the situation would likely increase Bitcoin use in the country.