Crypto Adoption Still Strong Besides the Bear Market...

I've been having a look at the crypto adoption index by Chain Analysis for 2021-2022 and it reveals some encouraging trends in crypto adoption, despite the recent bear market.

I like this particular annual report as it ranks countries taking into account Purchasing Power Parity (PPP) which factors in the cost of living in countries, so you get a more accurate picture of how significant crypto is in relation to the size of a country's economy.

Below are a few highlights...

The Bear market hasn't wiped out crypto adoption since the last bull market

Judging by the data up to September 2022 it seems that the recent bear market hasn't wiped out the increased crypto adoption during the previous bull market...

As we'll see below the theory offered for this is that crypto offers people living in unstable economies tangible benefits, so once people adopt they hodl.....

During the 12 months covered in this report most of the growth in adoption has come from lower and middle and income countries, with these rising up the rankings for crypto adoption and larger eocnomies droppping down.

The trend in the total market cap of all crypto since September to the present day has been down then up, overall sideways so one imagines the total adoption index would be at least at the same point today!

There's a truly global spread of the top countries for crypto adoption:

If you look at the top 20 countrie for crypto adoption by geographical region he picture is impressively global:

• 4 in Europe/ Russia/ Ukraine/ Turkey
• 8 in Asia
• 3 in Africa
• 5 in the Americas.

The only region not represented is the Middle East, and Europe is almost nowhere to be seen, with the UK only featuring at number 17, but this is a PPP ranking, so that will reflect the higher cost of living in the region!

Vietnam and the Philippines ranking in the top two is something of a surprise, I guess this reflects their status as up and coming status as developing countries with rapidly expanding middle class populations.

Nice to see that Ukraine is still at number three besides the war, but that may well have changed in the last six months.

India is still one to watch at number four with its massive population and again massive middle class.

And let's not forget that in terms of real economic crypto clout it's going to be the larger economies with the big institutions holding the most crypto: the USA, China (oddly?), Russia, Brazil and the UK.

It's mainly lower and middle income countries in the T20 for crypto adoption

If we factor in PPP like this report does we get some unexpected countries cropping up in the T20:

• Ten are lower middle income: Vietnam, Philippines, Ukraine, India, Pakistan, Nigeria, Morocco, Nepal, Kenya, and Indonesia
• Eight are upper middle income: Brazil, Thailand, Russia, China, Turkey, Argentina, Colombia, and Ecuador
• Only two are high income: United States and United Kingdom

The report theorises this is because crypto can make a real tangible difference to people's lives in unstable economies, and I see no reason to disagree with this, but of course, this still requires a significant middle class and some institutional representation for countries to rank, which is why we don't see real 'basket case' economies like Venezuela ranking that high up I think.

Focussing on South East Asia....

There has been massive growth in crypto adoption in SE Asia, especially in Vietnam and the Philippines, and this is driven by NFTs and P2 Earn gaming.

Axie Infinity is based in Vietnam and the Vietnamses apparently made up 40% of its player base at one point. Around 25% of people in those two countries have played P2E games!

The other main driver of crypto adoption is remittences - people using crypto networks to send money from abroad back to Bangladesh, India and so on, many SE Asian countries have huge remittence markets, and the report notes that crypto is disrupting the traditional FIAT routes.

The report also notes that regulation in India and Pakistan (and even China in a separate section) has dampened but (obviously) not entirely killed off crypto usage.

Adoption is still driven by larger institutional, not retail investors...

There is a slightly lower percentage of large investors controlling the majority of crypto in central and south Asia compared to Western Europe - but it's only around 5% difference: 55% compared to 60%.

Overall the trend of larger investors controlling half the crypto market is pretty similar across regions!

The Crypto Adoption Index: Final Thoughts

I think these macro stats show some encouraging trends - namely crypto adoption holding strong despite the bear market but also a trend towards more global diversification with more lower income countries adopting crypto more enthusiastically.

This seems to offer support for what Antonopoulos theorised - that Bitcoin etc. would play a significant in role in helping the unbanked in the global south!