Cryptocurrency adoption at the end of the second quarter of this year increased by more than 2,300% compared to the third quarter of 2019 globally, and more than 881% over the past year, according to a report from a well-known blockchain analytics firm. Kimberly Rosales, the founder of ChainMyne and an expert in the crypto space, provides an analysis of why cryptocurrencies have real value in the world.
The leading firm used a methodology that allows it to rank 154 countries by combining three metrics: the amount of on-chain cryptocurrency received, the on-chain retail value transferred, and the volume of peer-to-peer (P2P) trading.
All of the metrics are weighted by per-capita purchasing power parity (PPP). In addition, the volume of P2P exchange trade is weighted by the number of Internet users. The methodology, together with the changes made compared to last year’s report, allows for a better overview of decentralized finance (DeFi).
Rosales notes that institutional investment has been a driving force in the adoption of cryptocurrency in North America, Western Europe and East Asia in the past year. Many cryptocurrency prices reached record highs in this first quarter.
However, emerging markets view cryptocurrencies as a way of protecting their savings against currency devaluation as well as sending and receiving remittances, and conducting trade transactions.
P2P platform adoption is another important factor. Many emerging nations, like Kenya, Nigeria, Vietnam and Venezuela, that rank high on the report’s Index, use P2P portals to gain exposure to cryptocurrency. This is because they are often unable access centralized trading platforms. Rosales, using data from the report, stated that “Central, South Asia, Latin America, and Africa send more traffic to P2P platform than regions whose economies are larger, like Western Europe or East Asia.”
P2P platforms account for a greater share of total transactions volume than decentralized or centralized exchanges. This is due to the smaller transactions (less than $10,000), fewer professional transactions, and no institutional transaction.
Finally, both the US and China have fallen in the rankings compared to last year. Their rankings in P2P trading volume-weighted by population using the Internet declined dramatically, especially compared to the rest of the world. Their downward trend began around June 2020. In China, the regulatory crackdown may be a reason for this, while the growing number of institutional investors in the US also contributed to the trend.
“The next 12 months will show whether the adoption rate continues and, if so, which platforms it will use,” notes Rosales. “While P2P exchanges are preferred in emerging economies, innovations in the DeFi space may provide new ways to bank the unbanked within the crypto industry.”
If there is a continued increase in investment interest by institutions and corporations in Bitcoin, then new opportunities could be explored. This is a crucial step towards the creation of a new financial system that is more than speculative. We will experience unprecedented economic changes if this happens.
Undoubtedly, digital currencies represent one of the most prominent financial developments of recent times. Cryptocurrencies are assets that are not tied to the economy or politics of any country and guarantee the security of all transactions. Trying to include these technological advances in conventional banking would imply exercising a financial service free of intermediaries.
The whole world is experiencing this reality, although there are regions where the entry process is slower than in European or North American countries. However, all regions have the potential to use cryptocurrencies with the potential they offer.