The adoption of cryptocurrencies in the world is progressing. Chainalysis provides a factual representation of this assertion with its Global Cryptocurrency Adoption Index 2020, which uses a number of metrics that I would like to at least outline below before getting into the actual report and interesting findings from it.
The Global Crypto Adoption Index is made up of four metrics, which we'll explain in detail below.
We rank all 154 countries according to each of those four metrics, take the geometric mean of each country's ranking in all four, and then normalize that final number on a scale of 0 to 1 to produce the overall rankings. The closer the country's final score is to 1, the higher the rank.
The metrics include:
- On-chain cryptocurrency value received, weighted by purchasing power parity (PPP) per capita.
- On-chain retail value transferred, weighted by PPP per capita
- Number of on-chain cryptocurrency deposits, weighted by number of internet users
- Peer-to-peer (P2P) exchange trade volume, weighted by PPP per capita and number of internet users
For a more detailed definition please look directly into the paper. I think it would go beyond the scope to quote these details. A paraphrase would possibly lead to a falsification of the statement, as I can only comprehend and fully describe the metrics to a limited extent.
These four factors are used to assess which countries have made the most progress in adopting cryptocurrency. The results are as follows:
We see that Western Europe leads the way. Russia and Ukraine dominate this index by a considerable margin. Why Russia in particular is so exciting, or rather what funny detail can be discovered in this index, you will find out below.
First, let's look at the key takeaways:
- Cryptocurrency is truly global
Only 12 out of a total of 154 countries analyzed have achieved an index score of 0. This means that progress is visible at least in the majority of the world.
- Developing Countries have high grassroots cryptocurrency activity
Using Venezuela as an example, the report shows that a weakening domestic currency is a factor for a stronger increase in the adoption of cryptocurrencies.
- P2P platforms are essential to adoption in developing countries
The top four countries for P2P cryptocurrency activity weighted by number of internet users and PPP per capita all appear in the Global Crypto Adoption Index's top ten, and all four are developing countries.
It is concluded that P2P platforms are essential for the adoption of cryptocurrencies in developing countries. They say this has to do with the fact that regulatory hurdles, such as those present in the banking system, are removed and the "barriers to entry" are lower. They also refer to a November 2019 report by Matt Ahlborg:
https://medium.com/dlabvc/paxful-is-the-most-important-bitcoin-company-you-arent-paying-attention-to-4e699db0c5ca
In addition to this rough outline, there is also a detailed analysis of the different regions:
- Africa
- Central & Southern Asia and Oceania
- East Asia
- Easter Europe
- Latin America
- Middle East
- North America
- Northern & Western Europe
available. It would certainly go beyond the scope of this article to look at all the regions individually, so I recommend that anyone who is interested should take a look at the full report. It has 126 pages and offers some interesting information. Click here to open the full report
The following chart gives an overview of the global adoption of cryptocurrencies derived using the metrics listed above:
Here, as can be seen from the scale, countries with a low adaptation rate are marked light to white, while countries with a high adaptation rate are darker, going into deep orange. Once again, it is clear that Eastern Europe dominates this division. Honestly, I would not have guessed this at all initially. I would have thought that Asia would win this comparison, but all the more interesting. That's why we'll take a closer look at Eastern Europe and Russia in particular below. Before that, however, two or three general pieces of information that I also find relevant.
Long-term Hodler decrease
It may have something to do with the rising price. Wallet addresses holding bitcoin over 52 weeks are decreasing. Overall over the last 4 weeks there has been a drop of over 51,000 BTC previously held for 52+ weeks. This suggests that some investors have either seized the opportunity and taken profits, or are preparing for a similar scenario, thus ensuring adequate liquidity and possibly already bunkering their BTC on exchanges.
The above thesis can also be confirmed by this chart. BTC balances that prove an unrealized profit of over 100% have decreased by over 600,000 BTC over the last 40 weeks, so that as of today there is still a total of 9.89M BTC that have experienced an increase in value of at least 100% since entering their wallet.
But well, at this point I would like to end this general part. Overall, there are massive graphs available that can offer quite interesting information, so if you are interested, I simply recommend you to have a look through them yourself:
Click here to see more
A look at Eastern Europe
As promised at the beginning, we will now take a closer look at the data from Eastern Europe. More precisely, with the data from Russia. Russia takes first place in this ranking and is the only country with a score of 1. Thus, according to this paper, Russia is the country with the most progressive adaptation of cryptocurrencies.
According to the analysts, the reasons for this could include the following:
- Loss of trust in the government, in the economy and in the media.
- Protection against confiscation & corruption
- Loss of trust in banks (According to a study by the Herald oft he Russian Academy of Science, 56% of Russians do not trust banks).
- Familiarity with digital payments (Look this study and compare it with this study)
- Differences in the development of the financial sector
- More transactional needs in everyday life
This is really very roughly summarized. For the detailed information, again, you'll have to take a look at the paper, which should be worthwhile. It gets interesting, though, when we look at what the top crypto services are that are being used in Russia.
In first place is Binance, and that's how it looks for all other regions as well. However, it gets interesting when you look at the number 6 position. Because on the 6th place is Hydra.
In case you don't know what Hydra is:
The HYDRA project started in 2015. The Russian marketplace is one of the largest illegal marketplace currently operating on the dark web. In terms of turnover, HYDRA is in the TOP 10 Russian Internet companies. It recorded more than 3 million users. More than 100,000 transactions are made daily, more than 5,000 disputes are sorted.
The last time I read about this marketplace was last year, when HYDRA announced a token sale.
So Russia is the only country in this report that posts an illegal service in the top services. I find that exciting. Especially considering that Russia would not be credited in cryptospace per se, which is you purse of illicit funds. These are relatively evenly distributed across all the regions highlighted in the report, although Russia is one of the countries that does drive up the average somewhat.
I'm sure you were expecting something other than a closer look at this tiny detail of Russia, but it is a very striking detail.
For the Russian-speaking readers among you, I can also once again recommend the following report, which shows the development of HYDRA and presents a corresponding analysis of this marketplace:
Below are once again all the documents linked in this article. All graphics are from the paper described here.
The 2020 Global Crypto Adoption Index: Cryptocurrency is a Global Phenomenon
The 2020 Global Crypto Adoption Index: FULL REPORT
Adoption Index Market Insights
Paxful report from Matt Ahlborg
The two studies on payment methods are left out here. I only linked them because I didn't understand the argument before and suspect that many might feel the same way.
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