Crypto adoption as of the end of the second quarter 2021 has been up by more than 2,300% compared to Q3 2019 on a global basis, and over 881% in the last year, according to a report by blockchain analysis firm Chainalysis. The variations show adoption as a global phenomenon, but the report states that the biggest question is how much this adoption rate will continue on existing platforms, especially compared to new ones that are still emerging.
Chainalysis states it used a methodology that allows them to rank 154 countries by combining three metrics: the amount of on-chain crypto received, on-chain retail value transferred, and peer-to-peer (P2P) exchange trade volume.
All three metrics are weighted by purchasing power parity (PPP) per capita; in addition to this, the P2P exchange trade volume is weighted by the number of internet users. The methodology—along with the changes made to it compared to last year’s report—allows for a better overview of decentralized finance (DeFi).
The growth in adoption in North America, Western Europe, and Eastern Asia over the last year is due to institutional investment, the report states, as embracing the asset class has “proven compelling” with many crypto prices reaching all-time highs in the first quarter of this year.
On the other hand, emerging markets see cryptocurrencies as a way to preserve their savings in the face of currency devaluation, as well as to send and receive remittances, and carry out business transactions.
P2P platforms are another key driving factor for crypto adoption: many emerging countries that rank highly on the report’s index, including Kenya, Nigeria, Vietnam, and Venezuela, use P2P platforms to gain exposure to cryptocurrencies as they often cannot access centralized exchanges. The report states that, “Central and Southern Asia, Latin America, and Africa send more web traffic to P2P platforms than regions whose countries tend to have larger economies, such as Western Europe and Eastern Asia.”
Compared to centralized exchanges, merchant services, and decentralized exchanges, P2P platforms have a greater share of total transaction volume made up of smaller payments (under USD 10,000), very little professional transactions, and no institutional ones at all.
Finally, both the US and China have dropped in the rankings compared to last year, the report found, as their rankings in P2P trade volume weighted for internet-using population declined dramatically, especially compared to the rest of the world. Their downward trend started around June 2020, and the report states that in China, the amount of regulatory crackdowns may constitute a reason for this, while the growing number of institutional investors in the US also contributed to the trend.
The next twelve months will show whether the adoption rate continues, and if so, which platforms it will be using. While P2P exchanges are preferred in emerging economies, innovations in the DeFi space may provide new ways of banking the unbanked within the crypto industry.
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