The cryptocurrency trade took the world by storm in 2021, particularly in rising economies. In accordance with a Chainalysis analysis paper on ‘The 2021 Geography of Cryptocurrency Report,’ launched in October 2021, Nigeria is ranked sixth within the world crypto adoption index with an index rating of 0.26. Nigeria was as soon as the main nation in Africa when it comes to cryptocurrency adoption however in line with the report, Kenya leads in Africa, taking the fifth spot with an index rating of 0.28.
Nigerians, particularly youths, have turned to the cryptocurrency trade seeking ‘greener pastures’ which is majorly attributable to the excessive degree of unemployment plaguing the nation. In accordance with a March 2021 Bloomberg report, Nigeria’s unemployment charge stands at 33.3% as on the fourth quarter of 2020. The report cited the Nationwide Bureau of Statistics (NBS). The report additional reads:
“A 3rd of the 69.7 million-strong labour drive in Africa’s most-populous nation both did nothing or labored for lower than 20 hours every week, making them unemployed, in line with the Nigerian definition. One other 15.9 million labored lower than 40 hours every week, making them underemployed.”
What stories are saying about crypto adoption in rising economies like Nigeria
Because of this rising unemployment downside, many Nigerians have turned to the cryptocurrency trade seeking a possibility to earn from the large development the trade has witnessed in 2021. For example, the cryptocurrency market capitalization has grown by roughly 228% from about $760 billion to at the moment stand at $2.51 trillion as of the time of this writing. The cryptocurrency market capitalization traded as excessive as $2.96 trillion earlier within the month.
Asides from the capitalization development of the trade, there have been situations of astronomical development when it comes to curiosity within the area, participation within the area and likewise investments. Talking on the worldwide adoption charge of cryptocurrencies, Chainalysis Analysis said:
“On the finish of Q2 2021, that complete rating stands at 24, suggesting that world adoption has grown by over 2300% since Q3 2019 and over 881% within the final 12 months.”
The report additional lists the rising adoption of cryptocurrencies by rising economies as a significant contributor to this development.
“In rising markets, many flip to cryptocurrency to protect their financial savings within the face of forex devaluation, ship and obtain remittances, and perform enterprise transactions,” they mentioned.
Asides from this, TripleA put out a world adoption report stating that as of 2021, the world has over 300 million crypto customers worldwide, with Nigeria among the many high international locations with roughly 13 million customers. Utilizing an assumed inhabitants measurement of 200 million individuals, this implies roughly 6.5% of Nigerians have used cryptocurrencies in a single form or kind.
By way of investments, KPMG’s ‘Pulse of Fintech’ half-year report revealed that cryptocurrency and blockchain investments as of the primary half of 2021 stood at roughly $8.7 billion, which is greater than double the $4.3 billion investments made in the entire of 2020.
With these details, we’ll now have a look at methods through which Nigerians have been in a position to mint income by leveraging this new trade.
How Nigerians are creating wealth from crypto
Capital Appreciation (Purchase and Hodl)
That is the commonest approach that many Nigerians become profitable from the cryptocurrency area. It entails shopping for cryptocurrency property and holding onto them on a brief, medium or long run foundation in hopes that the value at which they’re able to promote, is greater than once they initially purchased it.
In 2021, the cryptocurrency area has seen astronomical worth rallies from tokens akin to Shiba Inu, Dogecoin, AXS and plenty of others. Nonetheless, though the value appreciation within the cryptocurrency world is large, cryptocurrencies like Bitcoin, which has grown by over 93% 12 months-to-Date (YtD), has had important crashes alongside the way in which. Essentially the most important occurred in Could 2021, the place Bitcoin misplaced 50% of its worth in a day.
Staking is the method of actively collaborating in transaction validation on a Proof-of-Stake (PoS) blockchain. On these blockchains, anybody with a minimum-required steadiness of a particular cryptocurrency can validate transactions and earn staking rewards.
Staking is one other approach of incomes passive earnings within the cryptocurrency area, which many Nigerians are warming as much as. Staking entails holding cash in a reside pockets, thus permitting you to earn extra cash for securing and collaborating in that exact crypto community. Decentralized Exchanges (DEX) like PancakeSwap, Uniswap and so forth, all supply their platform customers a possibility to earn passive earnings on their cryptocurrency holdings by way of staking.
Often known as yield or liquidity harvesting, it entails lending crypto property in an effort to generate excessive returns or rewards within the type of extra cryptocurrency. Yield farming, in line with Coinmarketcap, is at the moment the largest development driver of the still-nascent DeFi sector, serving to it to balloon from a market cap of $500 million to $10 billion in 2020. The sector at the moment has a complete market capitalization of $159.6 billion.
Nigerians concerned in farming additionally see it as a solution to earn passive earnings on their long run cryptocurrency holdings, as the method entails incentivizing liquidity suppliers (LP) to stake or lock up their crypto property in a wise contract-based liquidity pool, through which they get in return, a share of transaction charges, curiosity from lenders or a governance token.
Nigerians’ involvement within the futures and choices buying and selling market began lengthy earlier than the arrival of cryptocurrencies. Earlier than cryptos grew to become mainstream, Nigerians participated within the commodities and currencies market by way of futures and choices and it was popularly termed ‘foreign currency trading.’
They’re each high-risk investments that contain offering people who want to cut back future threat with their funding by way of pre-determined costs. Nonetheless, since a path of worth actions can’t be predicted, it may trigger substantial income if proper or losses if a market prediction is inaccurate.
Though they share some commonalities, they’re additionally markedly completely different in sure key respects. Though each derive their worth from an asset generally known as the ‘underlying’ akin to shares, commodities, exchange-traded funds (ETFs), share market indices, and on this case, cryptocurrencies, they each nonetheless differ when it comes to dedication and obligation. Futures signify a dedication to commerce that have to be squared off on the specified date. Whereas choices give the client the correct, however not the duty, to train the contract.
Preliminary Coin Providing (ICO) and Preliminary DEX Providing (IDO) are just like when a inventory, being listed on an change, has an Preliminary Public Providing (IPO). ICOs are a preferred fundraising technique used primarily by startups wishing to supply services, normally associated to the cryptocurrency and blockchain area. An IDO alternatively is when a mission launches a token by way of a decentralized liquidity change.
As a result of ease of entry and exit into the cryptocurrency market, any measurement of traders can take part in ICOs and IDOs not like with IPOs, the place a considerable sum of money is required earlier than collaborating. Nigerians are actually collaborating in ICOs/IDOs, in hopes of a fast worth improve on account of excessive demand on the official launch.
Nigerians are additionally benefiting from the world of crypto by way of clinching cryptocurrency-related jobs. There are various cryptocurrency corporations in Nigeria. They embody Remitano, Patricia, Nestcoin and so forth. These corporations have been in a position to create jobs for Nigerian youths.
Additionally, on account of the COVID-19 pandemic that gave rise to Work from Dwelling (WfH) insurance policies, many Nigerians have been in a position to safe overseas cryptocurrency jobs within the areas of writing, software program engineering, neighborhood growth and so forth, the place they earn in overseas forex.