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Lebanese youth making big bets on Bitcoin

A gaming lounge turned mining center
A gaming lounge in Mar Elias, Beirut, was turned into a mining center with 24 GPUs " image by Alaa Ayash

Lebanon has been witnessing an unprecedented economic collapse. The World Bank summarized the situation adequately by stating that: “Lebanon’s severe economic and financial crisis is likely to rank as one of the worst the world has seen in more than 150 years”. We owe this historical achievement to our government.

Desperate times are pushing the Lebanese to take big risks in the pursuit of these fresh US dollars. The Lebanese have been subject to “selective” capital controls for 18 months now leaving them queuing for hours at the doors of the banks, only to get a few hundred dollars of their own money.

A friend flying to Lebanon recently collected cash form a bunch of us living here in the UAE to be sent to families who find themselves unable to access their lifetime savings to buy basic necessities.

I digress, however it is important to paint a picture of the dire situation that the Lebanese are facing and the dangerous situation unfolding among the youth who find themselves running out of options to live a life with dignity.

The promise of cryptocurrencies is alluring. Unfettered access to money, and possibly wealth, as major cryptos like Bitcoin and Ether have been witnessing bull-runs over the past 24 months. More importantly it is money that is free of the fangs of a government that has been trying to loot the Lebanese of their wealth and hopes for over 3 decades.

The promise of Crypto

Beirut has recently become a thriving hub in the Middle East for hundreds, maybe thousands, of crypto dealers, traders and miners who rely on a local network of exchangers to trade and acquire cryptocurrencies like Bitcoin, ETH, Ripple, USDT and others.

Chances are if you wanted to get involved in the crypto scene, you know someone who knows someone who deals with “these issues”, said miner Sary Mohsen, who has just joined the crypto world this month. 

My best friend and I have been following the rise of Bitcoin and other cryptocurrencies since 2016, but it was financial reasons that prevented us from investing in [it],” said 28 year old Sary. “This year was the year we decided to dive into it no matter what it takes. 

Sary Mohsen, Lebanese crypto trader

Sary and his friend sold everything they have of value- smartphones, watches, jewelry- to buy two mining machines- called GPUs- by ordering them from a local supplier. He had to order them as fast as possible, as they are always out of stock and their prices have more than doubled since last February.

Another crypto dealer Mohamad Kanj who has recently made US$2000 in profit trading crypto told us that didn’t want history to repeat itself.

I saw what happened to my dad’s savings and I don’t intend for the same thing to happen to me. I want a secure life.

Mohamad Kanj, Lebanese crypto trader

Ali, one of Lebanon’s rare suppliers of mining machines who prefers to go by his first name told us that not only is he always out of stock, but he faces several obstacles when ordering the GPUs from their US-based manufacturer Nvidia. The first is their ever increasing prices. One GPU used to cost US$500 in February; the price more than doubled to US$1250 today and is still on the rise. The second challenge seems to be a supply monopoly by GPU manufacturing companies like Nvidia where the consensus is that it is limiting supply to create a buying frenzy. The third is getting the machines via the Lebanese customs that end up charging high fees to get these machines in the country.

Once they sort the machines, the majority of Lebanese miners seem to be using a mining platform called NiceHash. NiceHash rewards its users with Bitcoins in exchange for using their GPUs to mine “unknown currencies” says Ali. 

After receiving the Bitcoins – or other cryptos – as a reward from NiceHash, miners can exchange them into cash via a “third party exchanger” essentially someone who is willing to take their Bitcoin, convert it to an equivalent “stable coin” called USDT (where 1 USDT=1USD) and give them the fresh USD.

A well known crypto exchanger in Lebanon is Simon Tadros who told us that while profitable, his “business” carries significant risks.

I trade around US$ 400K a day for around 100 daily customers. That’s around US$ 2M a week. I charge around a 3% profit margin rate for every transaction. All this requires me to have security at my door in case of a robbery.

Simon Tadros, Lebanese crypto exchanger

An opportunity or a big lie?

Naturally, the crypto scene is polarizing people. You have those who believe in the crypto promise so much to the point where they dedicate their career to growing this nascent space. Daniel Ahmed whom I’ve recently interviewed on my podcast has co-founded Fasset, a Digital Asset Gateway for the region and beyond. Daniel holds crypto currencies on a personal level and has no doubt that this new asset class would thrive. “Too big to fail” he said. Others whom I refer to as the FOMO (fear of missing out) crowd are riding the wave and of course you have the staunch critics.

I think crypto is the biggest lie that happened to the world of Economics. How can you trust something that is so intangible? And with no reserves- the way real money has reserves in gold? I really do believe that crypto is one big lie that will deflate very soon- and cause huge damage to its investors.

Abdallah Atiye, Lebanese banker

A fad or not, the crypto world certainly represents one thing that the Lebanese youth have not glimpsed in quite a while: hope. With mounting economic pressures and skyrocketing unemployment, the Lebanese youth have taken the a plunge towards prosperity- one last time.

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