Cryptocurrency wave that swept the financial world

Why the current adoption of cryptocurrencies?

There’s not only one specific reason for why cryptocurrencies have become such an integral part of the world of financial tech, there’s rather a whole plethora of characteristics that these own that makes them very appealing for online use.

icons displaying the 4 reasons cryptocurrencies have been growing in the past months

Let’s number a few of those reasons, but remember, these aren’t in any way numbered by how important they are, it’s a random list!

  1. Going through the financial system using FIAT currency is sometimes very costly when it comes to mandatory fees users will have to pay to third parties in order to make financial transactions.

    Cryptocurrencies have almost eliminated that fee cost or at least shrunk it to the point where people are ever more seeking to do said transactions with the new currency. This also means that most transactions are safer, meaning the anonymity of the user is preserved, this, in a world where online privacy is decreasing, means a ton for most users.

  2. The lack of government oversight in the use of cryptocurrencies is another major reason why we’re seeing such a big migration towards the crypto-sphere. This means that even if a country collapses, meaning, they’re hit with a financial crisis that crashes their currency or inflates it beyond belief, crypto holders can rest assured that their money is safeguarded and out of harm’s way.

    Investors feel that this is an optimal way to keep their investments safe in times of peril.

  3. Profits! Obviously profiting from something will always act as a magnet to people, that’s our nature when you really think about it. Cryptocurrencies have made a lot of people very wealthy, and it hasn’t stopped giving, even to new investors.

    The lucky ones that had the right idea of investing in, for example, Bitcoin, early on and kept the coin instead of dumping it for quick profits, are now swimming in a load of money that nobody thought possible with such a low investment. This money-making machine isn’t as risk-free now but for those that keep a close eye on the market, turning up with a few extra bucks of profit by investing wisely and timely is still very much doable.

  4. Ease of access. For most people, getting into cryptocurrencies is looked upon as a seven-headed monster whose only way to get through is to defeat him by using a very rare and special sword found in the mists of hell. Well, it isn’t and in fact, crypto accessibility has become more accessible and easier as time goes by and the use of the currency becomes more mainstream.

    Users can now easily purchase crypto from reputable sources and this ease of access has only served to boost crypto’s popularity.

Geography of Crypto

globe image with highlight of countries with orange
A country with a score of 1 has the highest cryptocurrency adoption, while a country with a score of 0 has the lowest, measured between July 2020 and June 2021. Source Chainalysis Geography – Regional Flows.

Currencies included: BAT, BCH, BNB, BTC, BUSD, CRO, CRPT, DAI, ETH, GNO, GUSD, HT, HUSD, ICN, LEO, LINK,
LTC, MCO, MKR, MLN, OMG, PAX, PAXG, TGBP, TUSD, USDC, USDT, WETH, ZIL, ZRX

Analyzing where and how crypto is used the most, globally, can and will certainly give businesses leverage when it comes to the making of financial strategies for accepting crypto as a form of payment

A survey conducted earlier this year has shown that paying close attention to crypto trends is of most interest for B2C companies. Multinational companies can use these studies to figure out where to adopt this new form of money and which services provided will be better off by accepting payments in crypto.

The crypto market has surged from 65 million users in May of 2020, to more than 100 million by February 2021, that’s almost a 50% increase in user engagement in less than a year, according to Crypto.com, which is incredible by any sort of standards and again proves how important it is for businesses to start paying close attention to it.

Of course, some companies have already adopted the currency, like overstock.com and Expedia. Other popular payment service providers like Venmo and PayPal are now supporting peer-to-peer cryptocurrency transactions.

Crypto’s long-time fan Elon Musk is usually at odds with Bitcoin but Tesla, the company he owns, does accept cryptocurrency as a form of payment. Something businesses might ask is, where in the world is crypto mostly used, per capita?

Well, the answer to that might come as a surprise to many. FinTech and economic powerhouses like the U.S. and China are not among the highest crypto using nations out there

top 20 countries in our 2021 Global Crypto Adoption Index
top 20 countries in our 2021 Global Crypto Adoption Index – source https://blog.chainalysis.com/reports/2021-global-crypto-adoption-index

The top of that list belongs to Nigeria, where about 32% of the population say they own or use cryptocurrency, Vietnam is also among the top tier users, with 21% of its residents claiming to be using crypto. A lot of Latin-American countries are also heavy crypto users.

In fact, there are only 2 countries from Europe that are part of the top 10, Switzerland and Greece.

Having access to this information makes business decisions about where to implement crypto accepting platforms much more efficient. For example, Burger King started accepting payments in crypto in Venezuela, which is a cryptocurrency hotspot in Latin America, probably due to the heavy inflation their fiat currency is currently under.

One way for businesses to keep track of these trends is through the use of a geographic information system or a GIS. GIS’s keep track of trends in specific regions, their businesses, and customers, which allows for an easier interpretation of the trends that exist on a global scale.

Why is crypto, where crypto is?

Well, I do understand that title might be a bit confusing, but it’s exactly what I want it to be. There are reasons why crypto is mostly used in country X and country Y, it’s not by chance, it’s by default.

For example, Nigeria’s economy is going through troubled times, and the trend suggests that crypto adoption by the population started sometime after the hardships began. Same for the other countries directly below Nigeria on the list, Vietnam, the Philippines, and Peru all seem to exhibit similar conditions. These are countries where banking or financial services are not easy to access, high fiat money inflation rates which then lead to high foreign exchange rates and decrease in buy power, and also a high incidence of remittance payments from a family working abroad.

In richer countries, the reasons behind crypto use are much different, rather than being used with a short-term focus, places like the U.S. show trends that crypto is seen as a long-term investment with limited online purchasing power.

According to Gemini’s 2021 State of Crypto in the US report, the dollar’s global strength and the ease of access to banking and financial services make it that the general population feels less need of using crypto for day-to-day payments as an alternative to their fiat currency. 

This can soon change though, as U.S. banks and other companies start adopting blockchain technology for routine transactions, including the creation of new cryptocurrencies.

As an opinion bit, I do think most companies will eventually succumb to the positives of using crypto to provide their services, whatever those may be, but there’s an issue with companies using crypto, and that is the customer’s data access. Crypto payments are very secure and allow the user to stay anonymous, this isn’t something very favorable to B2C companies, that rely on their customers’ data to maximize profits. Only time will tell if the pros outweigh the cons with crypto implementation.

Speaking on a broader note, trying to understand why are crypto trends the way they are in different continents is made easy by looking at the Global Crypto Index study which states: And I’ll do this by continent, Crypto by world region.

Africa

Africa’s trends are explained by the remittances and fiat currency devaluation of most countries in the continent and this drives the cryptocurrency economy up.

cryptocurrency share of all value sent and received in africa

Despite this, Africa still has the smallest cryptocurrency economy of any region analyzed in the report, with just $8 billion worth having been received and $8.1 billion sent on-chain during the period studied.

Despite being a very small amount when compared to other regions, these transactions are sometimes life-changing to the users benefiting from them, in a region that faces continuous economic stability.

Africa’s economic instability comes from severe currency devaluation and socio-political instability, caused by centuries of over-exploitation by countries that used their riches to enrich themselves.

Cryptocurrency mitigates fiat currency instability

For example, the South African Rand, lost over 50% of its value against the U.S. dollar in the last decade alone and shows itself to be one of the most volatile fiat currencies worldwide. This leads to unwanted consequences for its residents, for they’re then unable to have their savings hold their value.

Here, cryptocurrency can sometimes act as a more stable value store for populations under these circumstances. Nigeria, one of the world’s leading crypto users, holds this title mostly because of its almost perpetual economic turmoil.

Central and Southern Asia and Oceania

Long before regulations even came up, cryptocurrency growth in these regions was already a constant in the market.

Central & Southern Asia and Oceania (CSAO) has the fifth-most cryptocurrency activity of the eight regions we will mention with over $41 billion worth of crypto sent and $40 billion received between June 2019 and July 2020. This amounts to 11.5% of all on-chain cryptocurrency volume transferred in the time period analyzed.

We can notice heavy retail-related activity, which can mean that users are turning to cryptocurrency for remittances and possibly everyday transactions as well.

Retail transactions are high but traders still drive the market

In terms of retail activity, CSAO possesses the third-highest share of its cryptocurrency market inside retail activity, with about 15% to 20% of the transaction activity existing in retail-sized transfers of $10,000 worth of cryptocurrency or less.

This activity might derive from remittances overseas.

East Asia is the world’s largest cryptocurrency market and CSAO’s biggest counter-party in cryptocurrency transactions. The region accounts for 31% of all cryptocurrency transacted in the time period of this analysis., which totals to % more than Northern and Western Europe, the second-highest receiving region. Almost all of this can be explained thanks to the region’s stranglehold on mining activity with China alone controlling 65% of Bitcoin’s hash rate(this is the measurement of how much computing power was required to mine the coin).

This leads to the obvious conclusion that sets this region as the place where most of the world’s bitcoin is born, which in turn gives the eastern Asian market a gigantic liquidity boost.

East Asia’s trading volume is mostly driven by a sturdy professional market but the retail market is also quite active. Something else to bear in mind is that the East Asian market is the closest thing we have to a self-sustaining market with almost 50% of all transactions involving an East-Asia-based address being counter-partied by another East-Asia based address. This is important because East Asia’s massive trading population makes it a key trading partner for other regions’ crypto-economy making East Asia the largest or second-largest counter-party for every other region analyzed.

The liquidity though mostly derives from the absolute dominance that East-Asia shows in the mining aspect of crypto, this creates a steady flow of newly mined cryptocurrency that keeps entering East-Asian addresses.

Still, even considering all of this, the region’s share of global crypto activity has decreased somewhat over the analyzed time period, not because the market had any issues, even though there was some stagnation in the professional market, but because other regions’ are simply catching up to it.

Northern and Western Europe (NWE)

This region is the second-largest cryptocurrency market in the globe, behind East Asia, and it accounts for, gives, or takes, 17% of all crypto value sent and received on a global scale.

In the likes of the other powerhouses, East Asia and North America, professional traders are abundant in NWE. This market is very similar to the North American one, showing itself to be a conservative, Bitcoin-focused market with the big difference between these two regions being that NWE does send more funds to other regions.

Another difference, but not as prominent, is that NWE’s illicit use of cryptocurrencies is slightly higher than in North America, mostly due to ransomware and darknet markets.

Again, just like East Asia and North America, NWE professional activity dominates its cryptocurrency market, with transfers above USD 10,000 worth of crypto. This value represents 90% of all volume received by addresses in the region.

As mentioned before, the biggest difference between NWE and NA, when compared with East Asia, is that the first two regions are much more conservative in the range of coins they use, focusing on the use of Bitcoin most and foremost, while East Asia diversifies its variety of cryptocurrencies. These two regions also trade less frequently than East Asia, according to data.

Eastern European

While this region only places forth in the cryptocurrency market by transaction volume of all the regions analyzed, it does contain the first and second-ranked countries in the Global Crypto Adoption Index.

Those countries are Russia and Ukraine. Why? Well, this Index accounts for a country’s population and wealth on top of the market size. Considering the goal of the Index is to highlight countries with the biggest grass-roots crypto adherence by everyday users.

These two countries show a disproportionately high cryptocurrency usage across all components of the Index, proving that a massive share of the population has moved their financial activity to the cryptocurrency realm, more so than residents of other countries

Russia and Ukraine basically lead the world in cryptocurrency adoption.

In the period analyzed, Russia sent over an estimated USD 16.8 billion worth of cryptocurrency and received about $16.6 billion while Ukraine sent USD 8.2 billion and received $8.0 billion.

These numbers are obviously lower than those of other countries, but keep in mind that the population and economic size are big variables that need to be taken into account. When that’s factored in, these countries show a level of cryptocurrency adoption higher than all other counterparts.

Why do we see these trends in Russia and Ukraine?

The exact reasons behind it may never be understood, but, following other country’s patterns, mistrust in the government, business(banks), and media might be a huge factor towards why we see this occurs.

Corruption, in general, is very common in both countries and it is known that funds can be seized at any time from businesses and private citizens who are not in the authorities’ best graces.

One particular study from the Herald of the Russian Academy of Sciences found that about 56% of Russians don’t trust banks, with much of the reasoning behind it stemming from the early 90’s economic difficulties the country faced. The same can be seen in Ukraine.

Again, remittances are key.

Cryptocurrencies have long been known to be able to solve the long times and high costs of remittances, as virtual assets can be transferred overseas instantly and with much smaller, if any, fees. This also contributes to the massive presence cryptocurrencies have in Russia and Ukraine alike.

Latino America

Moving to Latin America now, we can continue to talk about remittances as a major reason why people are adopting cryptocurrencies. According to the World Bank, remittances make up for 1.7% of the total GDP in Latin America, with only the Middle East, North Africa, and sub-Saharan Africa having a larger share of their GDP made up of overseas transfers. The on-chain data proves this, with 90% of cryptocurrency received by Latin America coming from outside the region.

In Latin America, it’s not just that businesses are having issues with banks, some individuals are also very troubled by the fact that they can’t have access to bank accounts, which is another factor driving the adoption of cryptocurrency. This lack of access usually comes from the fact a lot of the population has uncertain incomes, like working as Uber drivers, which makes the creation of a personal bank account very very unlikely.

Without easy access to banking services, many young people in the region are turning to cryptocurrency as a way of storing value in their savings, also due to the fact that a lot of countries there are under severe economic depression and currency inflation, like Venezuela for example, which I’ll get into next.

Venezuela is going through one of the worst economic crises seen in modern history, with inflation rates hitting 10,000,000% in 2020, turning Bolivar’s value to less than the paper it’s made of.

As in most economic crises, the harshest consequences all knock on the door of the average citizen. These circumstances have made it that cryptocurrency now plays a major role in Venezuela’s economy.

In the Global Crypto Adoption Index, Venezuela has reached one of the highest rates of cryptocurrency adoption in the entire world, as a lot of Venezuelans rely on cryptocurrency to receive remittances from abroad and preserve their savings against hyperinflation.

Venezuela’s contested government led by Nicolas Maduro, internationally accused of human rights violations and corruption, has launched its own cryptocurrency projects and it claims that these will mitigate the poor economic conditions Venezuelans are going through right now, but the main factor might be because by using cryptocurrencies, Maduro’s government can also bypass international sanctions imposed by the U.S. and its allies, as officials of the government have said in the past.

Not ignoring but also not emphasizing the sanction aspect of this move, this project does raise questions around whether people would embrace a government-led effort to utilize a tool that was basically designed to decentralize the economic and financial power of governments. It just doesn’t feel like this should be happening, and considering the Venezuelan government has squandered people’s livelihoods and therefore almost deleted public trust in the government.

A bit more about Maduro’s Crypto Project

In 2018, the government started the PETRO, a national cryptocurrency backed by the countries oil reserves. In addition to this, the government has also allowed seven cryptocurrency exchanges permission to operate in the country with the goal of facilitating PETRO transactions within the global cryptocurrency Economy.

The exchanges aren’t exclusive to PETRO, other popular cryptocurrencies like Bitcoin are available for users to buy and sell. This is another aspect that represents a risk to the evading of sanctions, as individuals with ties to the government could, theoretically, use them to receive transfers from citizens of the U.S., E.U., or other jurisdictions currently under Venezuelan related sanctions.

The Middle East

This region comes second to last in the overall cryptocurrency market of the regions analyzed, with Africa trailing behind it.

It accounts for 5% of the world’s cryptocurrency transaction volume between July 2019 and June 2020 at roughly %17 billion USD sent and about the same received.

Turkey

Turkey is the highest-ranking country in the region, according to the Global Crypto Adoption Index,  followed by Iran and Egypt and it accounts for most of the transactions volume and professional traders presence in the region.

Saudi Arabia

Saudi Arabia is also worth noting that while it ranks lower in the Index and has a formal ban on cryptocurrency trading, it does possess the highest P2P transfers volume in the period analyzed.

North America

North America is the third-most active region by cryptocurrency volume moved on-chain, accounting for 14.8% of all cryptocurrency activity over the analyzed time period, just behind Northern and Western Europe.

North America’s professional market is extremely active. As of June, over 90% of cryptocurrency transfers came from professional-sized transfers above USD 10,000 worth of crypto, but North America is showing the impact of growing a class of institutional investors whose transfers account for the increased dominance of professionals in North America’s market.

Institutional investors’ interest in cryptocurrency appears to be growing based on recent reports. In Fidelity Investments’ June 2020 survey of nearly 800 institutional investors across the U.S. and Europe, 36% said they’re currently invested in digital assets, while 60% said they believe digital assets have a place in their portfolio.

From the data available, one can see that these investors disproportionally favor Bitcoin, something to be expected considering the coin’s market dominance in North America, amounting to 72% of all cryptocurrency transactions.

Which is the most used Crypto and why?

Bitcoin is obviously the most used crypto around the globe and the reason is quite straightforward. Bitcoin was the first cryptocurrency to come around and that gave it a massive head-start in terms of exposure and real traction. 

top 5 countries for bitcoin search
data is taken from google trends for the keyword “bitcoin”

Everyone probably heard the word Bitcoin even before hearing about cryptocurrency, this doesn’t mean that it will always be like that though, Blackberry was the first smartphone and therefore gained a lot of attraction in sales, but it didn’t mean it was the best. All it takes is for the Apple or Samsung of cryptos to pop up and change the scenario.

interest in time for the search of bitcoin as a keyword on google

Still, according to coinmarketcap.com, Bitcoin still holds 44.9% of the market cap, with ETH coming in at number 2 with an 18.9% market cap.

Cryptocurrency statistics to be aware of

As previously mentioned, Bitcoin was the first decentralized cryptocurrency. Since then, its growth has been massive. Bitcoin’s success is caused by not only the fact that it was the first one, but also because it exposed the flaws of the traditional banking system in terms of security and anonymity. This original decentralized coin also brought the creation of thousands of other cryptocurrencies known as altcoins.

The impressive stats of crypto

  • Bitcoin had a market capitalization of $1072.21 billion as of February 21st, 2021
  • The entire global blockchain market is expected to reach $23.3 billion in the next couple of years.
  • Between 2012 and 2020, Bitcoin has gained 193,639.36%.
  • The user index for 2021 shows a 97% confidence in cryptocurrencies.

Having in mind the short amount of time that cryptos have been in existence, these are impressive stats to look at, and, if there’s something we can take from this is that there’s no barrier insight that will stop cryptos from being more and more adopted.

Sources

  • https://www.blockchaincenter.net/cryptocurrency-world-map/
  • https://markets.chainalysis.com/#trading
  • https://triple-a.io/crypto-ownership/
  • https://blog.chainalysis.com/reports/2020-global-cryptocurrency-adoption-index-2020
  • https://www.esri.com/about/newsroom/publications/wherenext/cryptocurrency-use-by-geography/
  • https://www.gq.com/story/cryptocurrency-will-not-die
  • https://coin.dance/stats
  • https://assets.ctfassets.net/hfgyig42jimx/5u8QqK4lqjEgL506mOx4m3/d44d8e204aecfc75a839e2a9d505f5d1/Crypto.com_Data_Report_-_On-chain_Market_Sizing.pdf
  • https://www.withersworldwide.com/en-gb/insight/an-introduction-to-crypto-1
  • https://www.hilarispublisher.com/open-access/bitcoin-investigations-evolving-methodologies-and-case-studies-2157-7145-1000420.pdf
  • https://onlinebusiness.northeastern.edu/masters-in-finance-msf/knowledge/guide-to-the-rise-of-cryptocurrency-digital-currency-and-bitcoin/
  • https://www.europarl.europa.eu/cmsdata/150761/TAX3%20Study%20on%20cryptocurrencies%20and%20blockchain.pdf
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Fred Edwards

CO-FOUNDER & CRYPTO ENTHUSIAST We are born in a chaotic age, all looking for our own space. A space that exists beyond ideas of what's right and what's wrong. Space where we can express, and find ourselves. Fred Edwards is on his way to find the best expression possible of what are his passions. Enthusiast about blockchain, tech in general and a close-knit gambler. Contact me at info [@] cryptogamble [dot] tips

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