How Nigerians Make Money From the Cryptocurrency Industry
The cryptocurrency industry took the world by storm in 2021, especially in emerging economies. According to a Chainalysis research article on “The 2021 Cryptocurrency Geography Report,” published in October 2021, Nigeria is ranked 6th in the Global Crypto Adoption Index with an index score of 0.26. Nigeria was once the top country in Africa in terms of cryptocurrency adoption, but according to the report Kenya leads in Africa, taking 5th place with an index of 0.28.
Nigerians, especially young people, have turned to the cryptocurrency industry in search of ‘greener pastures’, which is mainly due to the high level of unemployment plaguing the country. According to a Bloomberg report from March 2021, Nigeria’s unemployment rate stood at 33.3% in the fourth quarter of 2020. The report cites the National Bureau of Statistics (NBS). The report further states:
“A third of the 69.7 million working people in Africa’s most populous country were doing nothing or working less than 20 hours a week, making them unemployed, according to the Nigerian definition. 15.9 million more worked less than 40 hours per week, making them underemployed. “
What Reports Say About Crypto Adoption In Emerging Economies Like Nigeria
Due to this growing unemployment problem, many Nigerians have turned to the cryptocurrency industry looking for an opportunity to take advantage of the massive growth the industry has seen in 2021. For example, The cryptocurrency’s market cap has increased by around 228% from around $ 760 billion to currently stand at $ 2.51 trillion at the time of writing. The cryptocurrency’s market cap reached $ 2.96 trillion earlier in the month.
Besides the growth in the capitalization of the industry, there have been cases of astronomical growth in terms of interest in space, participation in space and also investments. Speaking on the global cryptocurrency adoption rate, Chainalysis Research said:
“At the end of the second quarter of 2021, that total score stands at 24, which suggests that global adoption has increased by more than 2,300% since the third quarter of 2019 and by more than 881% in the last year.”
The report further lists the growing adoption of cryptocurrencies by emerging economies as a major contributor to this growth.
“In emerging markets, many are turning to cryptocurrency to preserve their savings in the face of currency devaluation, send and receive remittances, and conduct business transactions,” they said.
Apart from this, TripleA released a global adoption report indicating that in 2021 the world had over 300 million crypto users worldwide, with Nigeria among the top countries with around 13 million users. . Using a supposed population of 200 million people, this means that around 6.5% of Nigerians have used cryptocurrency in one form or another.
In terms of investments, KPMG’s semi-annual Pulse of Fintech report found that cryptocurrency and blockchain investments in the first half of 2021 were around $ 8.7 billion, more than double the 4 , 3 billion dollars of investments made over the whole of 2020.
With these facts, we will now look at the ways in which Nigerians were able to generate profit by taking advantage of this new industry.
How Nigerians Make Money With Crypto
Capital appreciation (Buy and Hodl)
It is the most common way for many Nigerians to make money with the cryptocurrency space. This involves buying cryptocurrency assets and holding them for the short, medium or long term in the hope that the price at which they are willing to sell is higher than the one at which they originally bought them.
In 2021, the cryptocurrency space saw astronomical price increases for tokens such as Shiba Inu, Dogecoin, AXS and many more. However, although the price appreciation in the cryptocurrency world is huge, cryptocurrencies like Bitcoin, which have risen over 93% since the start of the year (YtD), have experienced significant crashes. along the way. The biggest happened in May 2021, when Bitcoin lost 50% of its value in one day.
Staking is the process of actively participating in the validation of transactions on a Proof-of-Stake (PoS) blockchain. On these blockchains, anyone with a minimum required balance of a specific cryptocurrency can validate transactions and earn staking rewards.
Staking is another way to earn passive income in the cryptocurrency space, which many Nigerians are bracing for. Staking is the process of keeping coins in a live wallet, allowing you to earn additional coins to secure and participate in that particular crypto network. Decentralized Exchanges (DEX) like PancakeSwap, Uniswap, etc. all offer users of their platform the opportunity to earn passive income on their cryptocurrency holdings through staking.
Also known as yield or liquidity harvesting, it is about lending crypto assets in order to generate high returns or rewards in the form of additional cryptocurrency. Yield farming, according to Coinmarketcap, is currently the primary growth driver of the still nascent DeFi industry, helping it grow from a market cap of $ 500 million to $ 10 billion in 2020. The industry currently has a total market capitalization of $ 159.6 billion.
Nigerians involved in agriculture also see it as a way to earn passive income on their long-term cryptocurrency holdings, as the process is to entice liquidity providers (LPs) to stake or lock in their assets. cryptos into a smart contract-based liquidity pool, in which they get in return a percentage of transaction fees, lender interest, or a governance token.
Nigerians’ involvement in the futures and options market began long before the advent of cryptocurrencies. Before cryptos became mainstream, Nigerians participated in the commodity and currency market through futures and options and this was commonly referred to as “forex trading”.
Both are high risk investments which involve providing individuals looking to reduce future risk with their investment through predetermined prices. However, since a direction of price movements cannot be predicted, it can lead to substantial profits if correct or losses if a market prediction is inaccurate.
While they share some commonalities, they are also quite different in some key ways. Although both derive their value from an asset called an ‘underlying’ such as stocks, commodities, exchange-traded funds (ETFs), stock indexes and, in this case, cryptocurrencies, they However, both differ in terms of commitment and obligation. Futures contracts represent a commitment to trade that must be settled on the specified date. Whereas options give the buyer the right, but not the obligation, to exercise the contract.
The initial coin offering (ICO) and the initial offering of DEX (IDO) are similar when a publicly traded stock goes through an initial public offering (IPO). ICOs are a popular fundraising method used primarily by startups looking to offer products and services, typically related to the cryptocurrency and blockchain space. An IDO, on the other hand, is when a project launches a token through a decentralized liquidity exchange.
Due to the ease of entering and exiting the cryptocurrency market, all sizes of investors can participate in ICOs and IDOs unlike IPOs, where a substantial amount of money is required before participating. Nigerians are now participating in ICOs / IDOs, hoping for a rapid rise in prices due to high demand at the official launch.
Nigerians are also taking advantage of the crypto world by landing cryptocurrency-related jobs. There are many cryptocurrency companies in Nigeria. They include Remitano, Patricia, Nestcoin and so on. These companies have succeeded in creating jobs for young Nigerians.
In addition, following the COVID-19 pandemic which spawned work from home (WfH) policies, many Nigerians were able to secure cryptocurrency jobs overseas in the writing fields. , software engineering, community development, etc. earn in foreign currency.