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A glance into the Chainalysis 2022 geography of cryptocurrency report

I’m excited to share Chainalysis’ 2022 World Crypto Adoption Index. For the third consecutive 12 months, we ranked all international locations by grassroots cryptocurrency adoption. The purpose of our index is to measure the place the most individuals are placing the largest share of their cash into cryptocurrency. Whereas institutional exercise is essential to that, we additionally wish to spotlight the international locations the place particular person, non-professional traders embrace digital property essentially the most.

Our methodology

So as to calculate our sub-indexes, we estimate international locations’ cryptocurrency transaction volumes for various companies and protocols based mostly on the net site visitors patterns of these companies’ and protocols’ web sites.

Counting on internet site visitors knowledge means the utilization of VPNs and different merchandise that masks on-line exercise, however provided that our index takes under consideration lots of of hundreds of thousands of transactions, VPN utilization would should be extraordinarily widespread to meaningfully skew our knowledge. Consultants we interviewed for the report usually agreed that our index matches their perceptions of the markets they function in, giving us extra confidence within the methodology.

Sub-indexes and the way they’re calculated

On-chain cryptocurrency worth obtained at centralised exchanges, weighted by buying energy parity (PPP) per capita

The purpose of this sub-index is to rank every nation by whole cryptocurrency exercise occurring on centralised companies and to then weight the rankings to favour international locations the place that quantity is extra important based mostly on the wealth of the common individual and the worth of cash usually inside the nation.

We calculate the metric by estimating the entire cryptocurrency obtained by customers of centralised companies in every nation and weighting the on-chain worth based mostly on PPP per capita, which measures the nation’s wealth per resident.

The upper the ratio of on-chain worth obtained to PPP per capita, the upper the rating, which means that if two international locations had equal cryptocurrency worth obtained, the nation with the decrease PPP per capita would rank forward.

On-chain retail worth obtained at centralised exchanges, weighted by PPP per capita

The purpose of this metric is to measure the exercise of non-professional, particular person cryptocurrency customers at centralised companies based mostly on how a lot cryptocurrency they’re transacting in comparison with the wealth of the common individual.

We approximate people’ cryptocurrency exercise by measuring the quantity of cryptocurrency moved in retail transactions, which we designate as any transaction for below US$10,000 price of cryptocurrency. We then rank every nation in accordance with this metric however weight it to favour international locations with a decrease PPP per capita.

Peer-to-peer (P2P) trade commerce quantity, weighted by PPP per capita and variety of web customers

P2P commerce quantity makes up a major proportion of all cryptocurrencies in rising markets. For this sub-index, we rank international locations by their P2P commerce quantity and weight it to favour international locations with decrease PPP per capita and fewer web customers, the purpose being to focus on international locations the place extra residents are placing a bigger share of their general wealth into P2P cryptocurrency transactions.

On-chain cryptocurrency worth obtained from DeFi protocols, weighted by PPP per capita

DeFi has been one of many fastest-growing areas of a cryptocurrency during the last two years. The truth is, as we see within the case of DEXs vs CEXs, decentralised cryptocurrency protocols, which primarily use Ether versus Bitcoin, have now overtaken centralised companies in on-chain transaction quantity.

Given the significance of DeFi to innovation in cryptocurrency, we needed our adoption index to focus on international locations the place customers are concentrating a disproportionately excessive share of their monetary exercise in DeFi protocols.

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For this sub-index, we rank international locations by their DeFi transaction quantity, with weighting to favour international locations with decrease PPP per capita.

On-chain retail worth obtained from DeFi protocols, weighted by PPP per capita

Simply as we would like our index to include the exercise of non-professional, particular person cryptocurrency customers on centralised companies, we wish to do the identical with DeFi. So, this sub-index ranks every nation by DeFi transaction quantity carried out in retail-sized transfers, weighted to favour international locations with decrease PPP per capita.

How our methodology modified this 12 months

The most important change to our index methodology this 12 months is the addition of two sub-indexes based mostly on DeFi transaction quantity and modifying two different sub-indexes to incorporate solely transaction quantity related to centralised companies.

We did this for 2 causes: First, as we clarify above, highlighting international locations main the way in which in DeFi given its significance to the general cryptocurrency ecosystem. Second, we needed to deal with the problem of DeFi-driven inflation of transaction quantity.

Deposits to and withdrawals from centralised companies present up in on-chain transaction quantity, however transactions inside these companies, comparable to trades on a centralised trade, don’t. Centralised companies monitor that transaction quantity internally, comparable to so as books for exchanges, which means we don’t have entry to it.

This isn’t the case with DeFi protocols. As a result of DeFi protocols are non-custodial and easily route cryptocurrency between non-public wallets, all DeFi transactions seem on-chain. That signifies that should you’re utilizing on-chain knowledge, DeFi protocol transaction volumes will obtain a bump that volumes related to centralised companies don’t obtain.

Within the context of this index, that would result in us artificially favouring international locations with greater DeFi adoption over ones with extra exercise on centralised companies, even when the quantity of actual transaction exercise is identical.

So as to handle this, we determined to measure every nation’s CeFi and DeFi transaction volumes individually, each in whole and on the retail degree, and use them as equal elements of the general index. This fashion, each nation’s transaction quantity is in contrast extra precisely, and we could be clear about which international locations see comparatively extra transaction quantity within the DeFi ecosystem.

The 2022 international crypto adoption index high 20

Nation General index rating General index rating Centralised service worth obtained rating Retail centralised service worth obtained rating P2P trade commerce quantity rating DeFi worth obtained rating Retail DeFi worth obtained rating
Vietnam 1 1.000 5 5 2 7 6
Philippines 2 0.753 4 4 66 13 5
Ukraine 3 0.694 6 6 39 10 14
India 4 0.663 1 1 82 1 1
United States 5 0.653 3 3 111 3 2
Pakistan 6 0.609 10 10 50 22 16
Brazil 7 0.562 7 7 113 8 7
Thailand 8 0.560 12 12 61 5 3
Russia 9 0.541 8 8 109 11 12
China 10 0.535 2 2 144 6 4
Nigeria 11 0.521 18 18 17 20 17
Turkey 12 0.519 9 9 121 19 15
Argentina 13 0.510 13 13 26 21 25
Morocco 14 0.507 19 19 21 33 18
Colombia 15 0.496 23 23 10 27 29
Nepal 16 0.478 17 17 19 34 41
United Kingdom 17 0.473 14 14 71 12 11
Ecuador 18 0.409 37 37 6 45 56
Kenya 19 0.397 43 43 5 9 34
Indonesia 20 0.396 16 16 129 18

Key takeaways from the 2022 crypto adoption index

General adoption slows worldwide in a bear market however stays above pre-bull market ranges

Our knowledge exhibits that international adoption has levelled off within the final 12 months after rising persistently since mid-2019. We take a look at this development within the chart beneath, the place we apply our index methodology globally by summing all 154 international locations’ index scores quarterly, from Q2 2019 to the current, and re-index that quantity once more to indicate adoption progress over time the world over.

World adoption of cryptocurrency reached its present all-time excessive in Q2 2021. Since then, adoption has moved in waves, it fell in Q3, which noticed crypto value declines, rebounded in This autumn once we noticed costs rebound to new all-time highs, and has fallen in every of the final two quarters as we’ve entered a bear market. Nonetheless, it’s essential to notice that international adoption stays nicely above its pre-bull market 2019 ranges.

The info means that a lot of these attracted by rising costs in 2020 and 2021 caught round and proceed to take a position a major chunk of their property in digital property. That additionally aligns with our earlier analysis exhibiting that cryptocurrency markets have been surprisingly resilient via current declines.

Huge, long-term cryptocurrency holders have continued to carry via the bear market. So whereas their portfolios have misplaced worth, these losses aren’t locked in but as a result of they haven’t bought. The on-chain knowledge suggests these holders are optimistic the market will bounce again, which retains market fundamentals comparatively wholesome.

Rising markets dominate the worldwide crypto adoption index

One development we famous final 12 months has solely gotten stronger this 12 months: Rising markets dominate the index. The World Financial institution categorises international locations into certainly one of 4 classes based mostly on earnings ranges and general financial growth: excessive earnings, higher center earnings, decrease center earnings, and low earnings.

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Utilizing that framework, we discover that the center two classes dominate the highest of our index. Out of our high 20 ranked international locations:

  • Ten are lower-middle earnings: Vietnam, Philippines, Ukraine, India, Pakistan, Nigeria, Morocco, Nepal, Kenya, and Indonesia
  • Eight are upper-middle earnings: Brazil, Thailand, Russia, China, Turkey, Argentina, Colombia, and Ecuador
  • Two are high-income: the US and the UK

As we discover later within the report, customers within the decrease center and higher middle-income international locations typically depend on cryptocurrency to ship remittances, protect their financial savings in instances of fiat foreign money volatility, and fulfil different monetary wants distinctive to their economies.

These international locations additionally are inclined to lean on Bitcoin and stablecoins greater than different international locations. Over the approaching years, it’ll be attention-grabbing to see what options the cryptocurrency trade can construct to extend adoption in excessive and low-income international locations.

Vietnam holds on to the highest spot, the US jumps to fifth, and China again within the high ten

There are additionally a couple of particular person international locations whose rankings stand out to us.

For the second consecutive 12 months, Vietnam is ranked first in cryptocurrency adoption. A take a look at the sub-rankings exhibits that Vietnam exhibits extraordinarily excessive buying energy and population-adjusted adoption throughout centralised, DeFi, and P2P cryptocurrency instruments. Different sources have additionally famous Vietnam’s love of cryptocurrency.

Polling achieved in 2020 discovered that 21 per cent of Vietnamese shoppers reported utilizing or proudly owning cryptocurrency, second solely to Nigeria at 32 per cent, and the adoption charge has doubtless solely grown since then.

Reviews from native media counsel that cryptocurrency-based gaming, together with video games following the play-to-earn (P2E) and move-to-earn (M2E) fashions, are notably widespread in Southeast Asian international locations. That goes not only for customers, however builders too, because the top-grossing P2E sport Axie Infinity is predicated in Ho Chi Minh Metropolis, with its success inspiring extra crypto gaming startups to seek out success in Vietnam.

America moved as much as fifth in our index rankings from eighth in 2021 and sixth in 2020. The US ranks within the high three of every sub-index, apart from inhabitants and buying power-adjusted P2P trade utilization, the place it ranks a lot decrease at 111th. This isn’t shocking, as our analysis exhibits that P2P trade utilization tends to be highest in international locations with low buying energy.

Maybe most attention-grabbing is the truth that the US is by far the highest-ranked developed market nation on our index and certainly one of solely two to make the highest 20, together with the UK. We’ll discover the explanations for this later within the full report.

Lastly, China re-entered the highest ten of our index this 12 months after inserting thirteenth in 2021. Our sub-indexes present that China is very robust in utilizing centralised companies, inserting second general for buying power-adjusted transaction quantity at each the general and retail ranges.

That is particularly attention-grabbing given the Chinese language authorities’s crackdown on cryptocurrency exercise, which incorporates a ban on all cryptocurrency buying and selling introduced in September 2021. Our knowledge means that the ban has both been ineffective or loosely enforced.

Bear markets can’t wipe out bull market adoption

As we famous above, whereas progress has change into extra sporadic with the onset of the most recent bear market, international adoption stays nicely above the degrees that preceded the 2020 bull market.

The info counsel {that a} crucial mass of recent customers who put capital into cryptocurrency in periods of value progress have a tendency to remain even when costs decline, permitting the ecosystem to persistently develop on web throughout market cycles.

One purpose for this might be the worth that customers in rising markets get from cryptocurrency. These international locations dominate the adoption index, largely as a result of cryptocurrency supplies distinctive, tangible advantages to individuals residing in unstable financial situations. We’ll discover these dynamics extra within the full report.

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Picture credit score: Chainalysis

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