When cryptocurrencies were on the rise, making money with them seemed like a walk in the park. You would buy a few coins and wait until the price increased enough to bring you a handsome profit. It was only a matter of time and patience. This is essentially how the early cryptocurrency investors have made fortunes, provided they didn’t sell off too early. But it is no longer that simple even if there is little doubt that Bitcoin’s best days lie ahead.
So is a steady income from cryptocurrencies possible today and what trading strategy should we employ to secure it?
The Triumph of Optimists
Before we get to profitable trading and specific approaches to such trading, let’s quickly review the current crypto market and how it relates to a bigger macroeconomic landscape.
Bitcoin is often criticized as being extremely volatile, and there is a grain of truth to these criticisms. After the November 2021 ATH, the king of cryptos plunged more than 3 times – from over $68k down to below $20k. For sure, such a dynamic may frighten even the most intrepid among cryptocurrency optimists.
With that said, let’s not forget that during the last couple of years Bitcoin has been highly correlated with the Nasdaq-100 Index, which is made up of such companies as Google (Alphabet), Amazon, Facebook (Meta), Apple, and their likes (101 companies all in all):
On March 24, 2000, this index reached a then ATH of 4,816. However, after the dot-com bubble had spectacularly burst later that year, its value eventually dropped to as low as 795 on October 8, 2002, which is a decline of over 80%, or more than 4 times, with the market giving up all the gains it had made during the boom (hint, Bitcoin is doing strong so far).
Nevertheless, the stocks ultimately recovered, and on November 22, 2021, the Nasdaq-100 Index made a new ATH of 16,764 – evidently, it had been rising since October 2002 – almost simultaneously with Bitcoin.
Bitcoin is now effectively a hi-tech stock on a par with the top guns from the technology sector, and most importantly, it is not going anywhere. So if the history of the stock markets around the world teaches us anything, it is only a matter of time till their indices beat previous ATHs, and with a vengeance at that. This idea is commonly referred to as the triumph of optimists.
In other words, it pays off to be an optimist.
On the other hand, the Nigerian Naira (NGN) loses on the order of 15-20% of its value annually, year in and year out, and these are the “official” losses, so to speak. However, if we take real exchange rates of NGN to USD, it is all doom and gloom for Naira.
For example, the official exchange rate is currently at 434.77 NGN, but the real one is more like 747.2 NGN, which is over 71% higher:
It could be argued that this huge discrepancy is the result of many years of accumulated pretending that inflation in Nigeria is not what it actually is and has been. Take it or leave it, but it means real inflation rates should be substantially higher than 15% per annum.
And that explains why Bitcoin has become so popular in this country.
How to Trade Bitcoin in Nigeria
The stratagem that lies at the heart of all profits advises us to buy low and sell high. However, the sad reality of trading not just cryptocurrency but any tradable asset out there is that most traders lose money in the end. In this manner, we can bravely claim that all losses are caused by buying high and selling low. This is not far from the truth.
But what forces a seemingly rational person to do that over and over again?
While the market's long-term changes are defined entirely by fundamental factors, in the short-term, however, it is driven by emotion and perception of value. Changpeng Zhao (aka CZ), the founder and CEO of cryptocurrency exchange Binance, once tweeted that you need to handle your fear and greed to become a successful trader.
Fear and greed are the two most powerful emotions that are fueling short-term price action. Unbridled fear forces the trading public to sell out in panic, most certainly at a loss (as otherwise it wouldn’t be so overwhelming). At the same time, insatiable greed has wiped out many a trader when the bull market all of a sudden (but still predictably) ends in a crash.
There’s even an indicator unpretentiously called the Fear & Greed index, which shows the overall market sentiment at the moment. To illustrate, right now the cryptocurrency market is dominated by extreme fear:
The bad news is that we can’t control or even meaningfully handle our fear once we succumb to it. Put differently, as long as you are in fear, you are not in control. The reverse is equally true. We are hard-wired for this emotion, and while it can be life saving in a prehistoric savannah, it is dangerous and potentially fatal to our bottom line in modern times.
Long story short, fear is the opposite of being in control.
On the bright side, fear is not the real culprit here. Really, you will start panicking as soon as the market starts imploding only if you have let your greed gain control over yourself prior to that. Greed paves the way for fear, and not the other way around. In practice, it means that you bought way more that you can safely “ignore to lose”.
But greed we can overcome.
We are taught that we should invest only what we can afford to lose, which often goes as “the most important rule of investing”. However, if we do in fact follow through this seemingly rational idea, we will only be able to earn so much. Moreover, by thinking that way, we would actually be priming ourselves for failure because we would be discarding the warning signs that the market sends us and that we would otherwise pay attention to.
A more practical (and profitable) approach in the long run is to invest in such a way that you always have spare money to invest more when the price starts sliding down. This is known as averaging down. By willing to buy the dip and having a sufficient margin of safety in terms of easily available money, you will never get caught off guard by severe price swings, let alone suffer the devastating consequences of fear.
This is not something entirely new. A variety of the averaging down technique where you regularly buy some asset with spare funds (in this case, dollars) has come to be known as dollar-cost averaging.
With this technique, you invest a certain amount of money whenever you have an opportunity (for example, after receiving salary or earning profits elsewhere), regardless of the current price. Since you can buy more at lower prices, your breakeven point tends to decline over time. This strategy has been tested in ages and it works. As long as you invest in an asset that has tangible value and real utility, it won’t fail you.
And this asset is certainly not going to be the Nigerian national currency.
Best Platforms to Buy Bitcoin in Nigeria
Due to a 2021 cryptocurrency ban enforced by the local monetary authorities, few traditional exchanges offer the option of trading Naira for Bitcoin. But when there is demand, there will always be supply, in one form or another. And in Nigeria and similar countries, it is peer-to-peer (p2p) marketplaces that gathered the highest popularity among local traders.
You can trade BTC for NGN on the following p2p platforms:
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Binance P2P
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LocalBitcoins
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OKX P2P
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Remitano
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Bitpapa
Arguably the most popular are Binance P2P and LocalBitcoins. However, both of them require ID verification.
More specifically, on Binance, you won’t be able to make a trade unless you have passed real identity verification requiring a driver's license, passport and whatnot. On LocalBitcoins, you can actually trade after you confirm your email and phone number, but your trades will be limited to €1000.
€1000 looks like a decent amount, but that’s how much you can trade per year.
While somewhat less known to Nigerian crypto traders, Bitpapa, on the other hand, allows you to stay completely anonymous. This marketplace does not impose any limits on how much you can trade daily, monthly, yearly and so forth.
Under these circumstances, it makes sense to check the prices on these platforms. We will use LocalBitcoins prices as it is the oldest p2p marketplace in existence today (founded in June 2012) and used by over 1,000,000 traders globally. Then we will compare the price there with Bitpapa’s prices, and see if there is any difference.
At the moment, you can trade Bitcoin for Naira on LocalBitcoins starting at 14,037,208 NGN:
On Bitpapa, Bitcoin currently changes hands at 14,047,709 NGN (the best offer there):
It appears that the lowest price on Bitpapa is not particularly different from the lowest price on LocalBitcoins (14,047,709 versus 14,037,208).
It should be noted, though, that the offer upper limits are different between these marketplaces, and on LocalBitcoins you can purchase more at that price. If we take into account this consideration, LocalBitcoins is a little bit more liquid than Bitpapa at these prices. It means you won’t be able to get the best price on Bitpapa if you need to buy a whole Bitcoin and prefer to use an existing offer.
Other than that, both platforms offer competitive prices, which makes them useful as fiat onramps to buy Bitcoin with Naira. If you don't mind going through the verification process, you can choose any. But if you do, Bitpapa is a viable alternative to LocalBitcoins.
And when the right time comes, you can sell your Bitcoin there too – by inverting the dollar-cost averaging strategy and trading the same amount in BTC for an ever higher price. Then rinse, repeat.
This is how you buy crypto low and sell high, without fear and greed.
Investing Wisely
We don't know what the future holds for Bitcoin specifically and other cryptocurrencies in general. We can’t even say how long the current market downturn will last, except that it will end one day and the sun will shine again for cryptocurrency supporters. But with the Nigerian Naira, we can be certain – it won’t become more valuable in the future. That alone makes Bitcoin a wise investment for the long haul.
Then it all boils down to converting your Naira into real value before it turns into trash.
FAQ
Q: Is Bitcoin Trading Illegal in Nigeria?
A: Bitcoin trading per se is not Illegal in Nigeria, although local banks are prohibited from processing transactions related to cryptocurrencies.
Q: Can I Trade BTC with Nigerian Naira?
A: You can trade BTC for Naira on a number of p2p marketplaces, for example, LocalBitcoins or Bitpapa.
Q: How Does a Crypto Exchange Work?
A: You exchange cryptocurrency for fiat (or other cryptos) by submitting trade orders where you specify the price and the amount.
Q: Which App Is Best for Cryptocurrency in Nigeria?
A: You can try Bitpapa – it doesn’t require identity verification and you can start trading right away.
