Three significant factors determine the future price of Bitcoin for Nigerians. The factors include the demand for gold, long-term macro-metrics, and the falling value of the dollar and Naira.
Since the beginning of August, Bitcoin and gold have shown strong signs of an inverse correlation. With the value of the U.S. dollar falling and growing institutional activity in the gold and Bitcoin sector, cryptocurrency has become more attractive and comparable to traditional assets such as gold.
The fall in the value of the dollar has been accelerated in recent months by the coronavirus pandemic and its effects on the U.S. economy. Many businesses in the nation are struggling to reopen or meet the financial obligations they have to their debtors. As a result, the value of the dollar has fallen against other reserve currencies.
Nigeria’s economy and the currency have also been negatively affected by the pandemic. The fall in the value of oil deepened the negative effects of the global pandemic on the economy and its currency. Earlier in the year, banks across Nigeria were so worried by the COVID-19 and drops of oil prices that they chose to reduce the amount of foreign currency their customers spent abroad.
According to Patrik Schowitz, global strategist at JPMorgan Asset Management:
“U.S. economic outperformance relative to the euro area and Japan (no longer) seems guaranteed, at least over the next few years, given the faltering virus response. […] The shrinking of its interest rate advantage makes the USD less appealing and pushes investors to consider deposits in other currencies. These cyclical factors won’t turn around in a hurry and the US dollar likely has room to fall further.”
The factors at play put increasing upward pressure on Bitcoin. Data indicates that Bitcoin is experiencing an extended accumulation phase which results in more investors purchasing the cryptocurrency to hold it. On August 23 crypto market analysis firm, Unfolded revealed that Bitcoin addresses with balances over 1,000 BTC hit a new record high.