Listen to this Article in Audio format
Purchasing bitcoin in Ethiopia using the Ethiopian Birr (ETB) takes more work. If you were to Google the price, based on an “official” or “bank” rate of 53.46 ETB for 1 US Dollar, it would have bitcoin trading at 918,984.59 ETB (or 17,190.13 US Dollars).
But because of aggressive capital controls and high penalties around transacting in foreign currencies, the local people cannot simply go to an Ethiopian bank and exchange their Birr for Dollars. Instead, ordinary Ethiopians go to peer-to-peer markets, often referred to as “black” or “hawala” markets. And unlike the bank rate reserved for a select few government-approved importers and purchases, the black market commands a much higher price.
Today, the black market price for 1 USD in Ethiopia is roughly 95 ETB. This is subject to change based on factors such as the amount being exchanged. Other determining factors include whether the transaction between peers is done digitally or is settled in cash. Even more enjoyable during the over-the-counter interaction is the quick ability of brokers and dealers to distinguish older bills and less favorable denominations, placing a premium on newer and higher-value notes.
Thus, buying one bitcoin as an Ethiopian will require roughly 1,633,062.78 ETB today, which means that the accurate bitcoin price is 77% more expensive than the Googled price. South Korea has coined this price phenomenon between their exchanges as the “Kimchi Premium.” Let us then call our Ethiopian example the “Injera Premium.”
This is a guest post by Kal Kassa. You can follow him on Twitter @kalkassa. Opinions expressed are entirely their own and do not necessarily reflect those of Satoshi’s Journal or Satoshi’s Entertainment Company.