Price fluctuations are common to most who deal with cryptocurrencies. Also, that the price within a day changes in the double-digit percentage range, is not uncommon. But why are these fluctuations not only within the price but also between different exchanges?

The answer can be pointed to a single sentence: The Bitcoin price is nowhere written down. In turn, he receives his value from supply and demand.

Because the price for a Bitcoin always consists of how much a seller demands for it and how much a buyer is willing to pay for it. The stock exchanges then take on a mediating role and thus ensure an agreement between the parties. Depending on which stock exchange you are trading at, this difference (less any costs incurred) is different.

The aspect of supply and demand is joined by geopolitical factors. Depending on where the respective stock exchange is located, the price may be influenced by regulatory hurdles such as taxes or the economic situation. The extent of this can be seen in the country of Zimbabwe.

The case of Zimbabwe – extreme example of price fluctuations

In Zimbabwe, the Bitcoin price is extremely different from the usual market price. So he noted at the time of publication at 17,379 US dollars. The average price of Coinmarketcap listed exchanges is $ 11,380, a difference of nearly $ 6,000. To explain this significant difference, it is necessary to take a look at the economic and political situation.

When the autocratic president Mugabe was replaced by the military, the country was already in financial ruin. The Zimbabwe dollar was completely abolished after inflation of up to 230 million%. In his place, among other things, the US dollar occurred. However, due to a lack of export economy, there was not enough, physical bills are still in short supply.

But even the US dollar is not worth as much as it should be worth. For example, in January 2017, $ 100 of physical money was paid for $ 100 of physical money. By November it was already 180.

In addition, banks can not print the US dollar on their own since it is a foreign currency. The result is that ATMs can not afford to pay much money, remittances abroad are almost impossible – even the government has problems transferring money abroad.

Lack of confidence in banks

In addition, there are many people who work abroad and want to support their families in Zimbabwe. The problem: The banks devour a large part of the money sent. There is therefore a lack of trust in the institutions, foreign currencies are quickly losing their value in Zimbabwe.

So the call for alternative currencies was great. Despite the ever-lamented volatility of the crypto currencies, the Bitcoin seemed safer than the above options. So many have invested their existing assets in Bitcoin to protect it from depreciation.

On the one hand, it does not fall victim to inflation and banks, on the other hand, people can use it to make international payments.

So the many options that make Bitcoin stand out from traditional payment methods in the country make it more attractive. Ultimately, it has added value through its utility and function as a store of value. People therefore have more confidence in the cryptocurrency than in all other alternatives.

This will allow sellers to ask for more and buyers will be willing to pay more – especially if they get rid of insecure assets from their old holdings.

Arbitrage in Zimbabwe? D rather not

With a price difference of $ 6,000 per Bitcoin, traders may be prickling their ears – why not just transfer Bitcoin to Zimbabwe and make a profit there?

The answer has already been described in principle: The money would probably not leave the country. Because to register at the African Exchange Golix, you need a local bank account. Since all fiat money flows back through the central banks, it either loses value or gets lost along the way.

For the same reason, people in Simbabe would not buy it on external exchanges. The money can barely pass the limits, simply because it simply does not exist. Bitcoin has more value as a currency and value store in Zimbabwe than its dollar price.

In principle, Bitcoin in Zimbabwe gets its value through its applicability. In its originally intended sense as a decentralized means of payment and currency alternative, it is worth even more than its price.

Get the latest Bitcoin News on The Bitcoin News
Our Social Networks:
Facebook Instagram Pinterest Reddit Telegram Twitter Youtube