“I used to walk an hour to work every day because I couldn’t afford any form of transportation,” shared Ashraf*, who now enjoys a luxurious lifestyle thanks to his investments in cryptocurrency. With a new Kia Sportage worth Rs9 million ($32,000), a three-story home, and a state-of-the-art solar system, Ashraf’s success story is a testament to the potential rewards of crypto investments. He began with Bitcoin when it was just $700 and a wallet of $1.
Ashraf’s experience highlights a growing trend in Pakistan, where many are turning to cryptocurrencies as a means of wealth preservation amid a turbulent economy. Despite the illegality of crypto trading in Pakistan, most transactions occur on peer-to-peer exchanges like Binance, with communication often taking place on apps like Telegram. Following recent concerns over Telegram’s security, the app Signal is emerging as a more secure alternative.
As economic austerity continues to squeeze Pakistanis, crypto has become an attractive option for many trying to safeguard their wealth, according to Chainalysis’s 2023 Geography of Cryptocurrency Report. A report from the Federation of Pakistan Chamber of Commerce and Industry estimated Pakistan’s cryptocurrency holdings at around $20 billion in 2020-21, reflecting a 711% increase. In comparison, the State Bank of Pakistan had $14.7 billion in liquid foreign reserves as of August 16, underscoring the significant interest in cryptocurrencies.
Globally, crypto’s influence is growing, with notable investments in political campaigns, particularly in the US. Late 2021 saw a shift from riskier assets like stocks and cryptocurrencies to interest-earning investments as US interest rates rose. However, in 2022, Larry Fink, CEO of BlackRock, endorsed cryptocurrencies, and former President Trump has raised over $4 million in crypto assets. Pro-crypto groups are lobbying heavily in the US, with major contributions from Coinbase and Ripple to political action committees.
Yet, the volatility of cryptocurrencies is a major risk. Bitcoin’s recent drop amid a global equity market downturn has revealed its correlation with stocks, challenging its status as a safe-haven asset. Ashraf himself experienced significant losses during the market crash but managed to recover a substantial portion as conditions improved.
Ashraf advises investing early in new cryptocurrencies when their value is low and shares his strategy for success: “Buy hundreds of thousands of crypto coins before they are launched when they are worth less than one-hundredth of a cent.” Despite the potential for high returns, he acknowledges the inherent risks.
Pakistan, ranked among the top 10 in Chainalysis’s Global Crypto Adoption Index for 2023, has seen increased cryptocurrency adoption driven by tech-savvy youth and remittances from overseas Pakistanis. A KuCoin Pakistan report from June 2023 noted that 17% of internet users aged 18-60 are crypto investors.
Zeeshan Ahmed from Rain Financial highlights that crypto investors in Pakistan are diverse, with some splitting their wealth between traditional stocks and crypto. Those with excess cash often use stablecoins like USDT to preserve value amid a dollar shortage.
Opportunities exist for economic benefits through crypto adoption, such as attracting foreign investment and enhancing financial inclusion. However, robust regulations and infrastructure are crucial for safe and sustainable growth.
Influencers like Waqar Zaka caution against the risks of crypto trading, particularly leveraged trading, which can lead to significant losses. Zaka advises against investing in meme coins and emphasizes the importance of thorough research and understanding global market indicators.
In Pakistan, much of the USDT traded comes from the black market, posing legal risks. Zaka urges buyers to verify wallet addresses and practice strict digital hygiene to avoid trouble with authorities.
As cryptocurrencies gain traction in Pakistan, the promise of wealth is accompanied by significant risks. Informed decision-making and cautious investment practices remain essential for navigating this volatile market.
