The main driver of the massive growth is P2P Platforms usage in Emerging markets, according to Chainalysis

Overall, 2021 has been a great year for the growth of Cryptocurrencies — despite the pullbacks, general FUD & regulatory concerns. According to the latest data from Chainalysis Insights, the massive growth this year has gotten the attention of the industry as the digital assets move ever closer to mainstream adoption. The second iteration of the Global Crypto Adoption Index highlights this in the report that shows Crypto adoption jumped over 880% in the last year.

The Chainalysis index provides an objective measure of which countries have the highest levels of cryptocurrency adoption. The simplest way to come up with such a ranking would be to look at transactional volumes in these countries. However, such a methodology would be skewed in favor of countries with high levels of professional and institutional cryptocurrency adoption — as they move the largest amount of cryptos.

Chainlysis took a different approach — their index ranks 154 countries on three different metrics. The value of the index is derived by taking the geometric mean of each country’s ranking in all three, and then normalize that final number on a scale of 0 to 1 to give every country a score that determines the overall rankings. The closer the country’s final score is to 1, the higher the rank.

A fourth metric, which was included in the last year’s ranking — the number of deposits by country weighted by the number of internet users was eliminated since some of these transactions within an exchange, aren’t captured on-chain and their transparency or record can’t be verified. This is unlike Decentralized Finance (DeFi), where all transactions can be verified as no centralized service ever takes custody of users’ assets.

Here are the three metrics on which the Global Crypto Adoption Index is constructed — all three are weighted by purchasing power parity (PPP) per capita with the addition of the number of internet users in the last metric.

On-chain cryptocurrency value received — favors countries where total cryptocurrency activity is more significant based on the wealth of the average person and value of money generally within the country.

On-chain retail value transferred — this metric measures the activity of non-professional, individual cryptocurrency users, based on how much cryptocurrency they are transacting compared to the wealth of the average person.

Peer-to-Peer (P2P) exchange trade volume — Emerging markets are a major force in P2P exchange trade volume. This metric favors countries with lower PPP per capita and fewer internet users.

It is pretty evident from the first chart above (left) that more countries are seeing existing adoption increase. The chart was constructed by applying the index methodology to all 154 countries’ index scores. At the end of Q2 2020, following a period of little growth, total global adoption stood at 2.5 based on our summed-up country index scores. At the end of Q2 2021 (despite plateauing), that total score stands at 24 — showing that global adoption has grown by over 2300% since Q3 2019 and over 881% in the last year.

The table on the right (above) ranks the top 20 countries in our 2021 Global Crypto Adoption Index — with a breakup shown in all three metrics as well. Vietnam, India & Pakistan were the top adopters of cryptocurrencies with countries from Latin America, Africa & the Far East also featured on the list. Interestingly, one of the least developed countries like Afghanistan was №20 on the list.

Another key trend that stood out was the adoption in the emerging markets was powered by P2P platforms, and this was the reason why countries like Kenya, Nigeria, Vietnam, and Venezuela ranked high on the index. All these countries had huge P2P transactional volumes. Despite being the powerhouses of crypto, China & the U.S ranked №13 and №8 respectively on the adoption index. The biggest reason both countries dropped is that their rankings in P2P trade volume weighted for internet-using population declined dramatically — China fell from 53rd to 155th, while the U.S. fell from 16th to 109th.

Overall, the analysis suggests that the explosive growth of DeFi and centralized crypto businesses is driving growth in developed economies while P2P platforms are driving new adoption in emerging markets. One thing is for sure, that crypto adoption is becoming a global phenomenon.

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May 2023