Cryptocurrency or “cryptada” is a digital currency that works on blockchain technology. It only requires an internet connection, and is traded without the need for a central bank or financial institution. It has become a global phenomenon, as it has removed the traditional barriers of the financial system.
The crypto market has become a major influence on the global economy, with Bitcoin, created in 2009, becoming the most prominent symbol. Since then, thousands of altcoins have emerged, some successful, some failed.
This article discusses in detail the current state of the crypto market, its benefits, challenges, impact on Somalia, and the expected future.
History and Growth of the Crypto Market
When Bitcoin was created, many people saw it as a science project or something that could not be realized. But a few years later, its price suddenly skyrocketed, sparking widespread global interest.
2017 is considered the biggest year for Bitcoin, when its price reached over $19,000 per coin. Despite a significant drop in 2018, the crypto market has not lost its fans. Since then, stablecoins such as USDT (Tether), USDC, and BUSD have emerged, which are pegged to the dollar to reduce market volatility.
In 2020-2021, as the COVID-19 pandemic hit the world, crypto became a place where many people saw a “safe haven” to store their money. It was then that the market peaked, with the price of Bitcoin reaching over $60,000.
Today’s Market Situation
1. Prices and Volatility
Today, the price of crypto is still volatile, although it is more stable than before. Bitcoin and Ethereum still lead the way, but other new currencies are emerging such as Solana, Cardano, and Avalanche.
2. Growth of Stablecoins
Stablecoins have become the backbone of the market, because they offer stability compared to other volatile currencies. They have also facilitated daily transactions and trading.
3. Growth of Africa
Africa has become an important market. Countries such as Nigeria, Kenya, and South Africa are among the largest users of crypto. Somalia, despite not having clear legislation, has strong interest in it.
4. Global Impact
Cryptocurrency has caught the attention of major institutions such as the IMF and the World Bank, who have sometimes warned of the risks, yet know that it has an impact that cannot be ignored. Many governments are experimenting with “Central Bank Digital Currencies (CBDCs)” to compete.
Benefits of the Crypto Market
1. Foreign Remittances
About 40% of Somalia’s economy relies on remittances from the diaspora. Cryptocurrency can be a cheap and fast alternative. While traditional services take days and involve high fees, crypto works in minutes.
2. Preventing Inflation
In countries where their national currencies have depreciated, such as Zimbabwe or Venezuela, people have used crypto as a safe haven. This is an example of how the crypto market is suitable for fragile economies.
3. Transparency and Security
Blockchain is a shared, immutable ledger. Once a transaction is recorded, no one can erase it. This increases trust between people and companies.
4. Business and Innovation Opportunities
Cryptocurrency has spawned new companies and businesses — from exchanges, fintechs, to DeFi and NFT services. Somalia can leverage this innovation to create jobs and economic opportunities for its youth.
Market Challenges
1. Lawlessness
Lawlessness is a major challenge. Somalia has yet to enact a law regulating crypto, leading to fears that the market could become a place of fraud.
2. Price Fluctuation
Cryptocurrency prices are volatile. Someone who buys Bitcoin today could lose a large percentage of their investment the next day. This makes it a risky investment.
3. Scams and Attacks
There are many scams such as Ponzi schemes, where people are tricked into investing money in a fake project. There are also hacker attacks that lose millions of dollars.
4. No Help If Something Goes Wrong
If someone loses their “private key”, their assets cannot be recovered. This is different from regular banks that provide customer support services.
The Role of Governments and Laws
Many countries have already enacted laws regulating cryptocurrencies.
• El Salvador: became the first country to legalize Bitcoin as a national currency.
• Nigeria: although previously blocked, today it allows some uses, while also testing CBDC.
• The United States
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