10% Growth in Crypto Market Cap Reduces Value of African Firms by 0.76% – Featured Bitcoin News

A study undertaken by two assistant professors at American University in Cairo (AUC) has suggested that an increase of 10% in the crypto market cap causes the market value of “African micro-entities” to drop by 0.76%.

The growth of the crypto market hurts less competitive sectors

Mina Sami, Wael Abdulallah and Wael Al Abdallah found that each 10% rise in crypto market cap results in an equivalent 0.76% decrease of African microentities’ market values.

The study findings also suggested that firms in less competitive sectors are “more likely to get hurt by the cryptocurrency market’s expansion.” For instance, the two authors conclude in their report that the cryptocurrency market has “a considerable effect on Africa’s energy, financial, industrial, and consumer services sectors.”

The authors stated that the rise of crypto markets has had less impact on the real estate and information technology industries. Meanwhile, the authors claimed that their study has highlighted the importance of having “internal strategies and firm experience.” These attributes are vital for African firms that must now compete with cryptocurrencies.

Although the authors — who are also assistant professors at AUC — have acknowledged the steps taken by countries to counter the growth of the cryptocurrency market, they argue, however, that such steps have in fact “failed to protect their domestic firms.” According to the authors, this failure calls for interventions by governments that “improve the financial market’s competitiveness in Africa.”

Enhancing the Competitiveness of Stock Markets

To achieve this goal, the study says governments should first “raise the competitiveness of their stock markets.” In their paper, the authors then list three requirements that must be met in order to improve the competitiveness of stock markets. These are the first and second requirements.

To compete in the crypto market, (1) we need to boost innovation and improve regulations. (2) The diversity and inclusion of stock markets in Africa should be encouraged by governments. The African stock market capital is enormous, but it has limited stocks.

The third listed requirement concerns Africa’s financial services and infrastructural challenges. Such challenges, according to the authors, “have become an obvious impediment to the development and competitiveness of the stock market.”

Besides improving the competitiveness of stock markets, the authors said firms must also “strengthen their strategies to attract investors.” They also suggested that Development Financial Institutions (DFI) should invest more in countries, industries, or business areas that “private investors perceive as costly and risky.”

Are you in agreement with these findings? Please comment below.

Terence Zimwara

Terence Zimwara was a Zimbabwe award-winning journalist and author. His writings have covered the economic problems of several African countries and how digital currency can offer an escape route.