Central & Southern Asia Lead in 2023 Crypto Adoption, Chainalysis Reports

Central and Southern Asia are emerging as dominant regions in the global grassroots adoption of cryptocurrencies, according to the 2023 Chainalysis Global Crypto Adoption Index released on September 12.

Chainalysis, in its fourth annual Global Crypto Adoption Index, measures countries’ involvement in the crypto space by combining on-chain data with real-world statistics. The focus isn’t on countries with the highest transaction volumes, which would be predominantly dominated by wealthy nations. Instead, the index aims to spotlight countries where the average individual is more actively participating in the crypto ecosystem. 

The index consists of five sub-indexes: 

1. On-chain cryptocurrency value received at centralized exchanges, weighted by purchasing power parity (PPP) per capita.

2. On-chain retail value received at centralized exchanges, also weighted by PPP per capita.

3. Peer-to-peer (P2P) exchange trade volume, weighted by PPP per capita and the number of internet users.

4. On-chain cryptocurrency value received from DeFi (decentralized finance) protocols, weighed by PPP per capita.

5. On-chain retail value received from DeFi protocols, similarly weighted.

To estimate transaction volumes for these sub-indexes, the team uses web traffic patterns related to the relevant cryptocurrency services and protocols. Acknowledging that web traffic data might not be perfect, Chainalysis takes confidence from its vast data set, which includes “hundreds of millions of transactions and 13 billion web visits.”

India, positioned within the Central & Southern Asia and Oceania (CSAO) region, leads the 2023 Global Crypto Adoption Index. Six of the top ten countries are from the CSAO region, underscoring the area’s prominence in the crypto adoption landscape. Other notable entries include Nigeria, Vietnam, and the United States, ranked second, third, and fourth, respectively.

Interestingly, while global grassroots adoption seems to have declined, a different narrative unfolds in the subset of lower-middle-income (LMI) countries. LMI nations, which include rising economies such as India, Nigeria, and Ukraine, have exhibited the most robust recovery in grassroots crypto adoption over the past year. Notably, these countries have witnessed growth in crypto adoption that surpasses their Q3 2020 levels, even while other wealth categories lag.

LMI countries hold special significance as they house 40% of the world’s population and are characterized by dynamic industries and burgeoning populations. With crypto adoption burgeoning in LMI countries and institutional interest from high-income nations, the future may witness a unique blend of top-down and bottom-up adoption approaches.

The complete findings, trends, and insights are set to be detailed in the upcoming “2023 Geography of Cryptocurrency Report” by Chainalysis.

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Chainalysis Report Reveals Crypto Has Gone “Global” In 2021

The blockchain is an immutable record. Companies like Chainalysis make a living out of interpreting that data, extracting value and insights from the numbers. And on-chain analysis reveals that crypto is now “a truly global phenomenon.” The data comes from Chainalysis’ 2021 Global Crypto Adoption Index. The people that really need crypto, qualified as “emerging markets” in the paper, are increasingly involved in the space.

Related Reading | Crypto Company Circle Seeks To Become Global Digital Currency Bank

In The Weekly Update, our friends at Arcane Research found this to be the headline:

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“Chainalysis further ranked the countries with the highest crypto adoption following their methodology. A majority of the countries featuring at the top 20 list are emerging market economies.” 

And clarifying their intention, Chainalysis’ paper itself starts with:

“While the professional and institutional markets are crucial, we want to highlight the countries with the greatest cryptocurrency adoption by ordinary people, and focus on use cases related to transactions and individual saving, rather than trading and speculation.”

That being said, we have to talk about…

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BTCUSD price chart for 08/25/2021 - TradingView

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BTC price chart on Bitstamp | Source: BTC/USD on TradingView.com

What Was Chainalysis ’ Methodology? 

The company focused on “cryptocurrency adoption by ordinary people,” so they weighted everything by purchasing power parity per capita. They ranked “all 154 countries” according to three metrics:

  1. On-chain cryptocurrency value received, weighted by purchasing power parity (PPP) per capita.
  2. On-chain retail value transferred, weighted by PPP per capita.
  3. Peer-to-peer (P2P) exchange trade volume, weighted by PPP per capita and number of internet users.

It’s worth clarifying that in that third one, they “rely on data supplied by two of the largest P2P platforms operating — LocalBitcoins and Paxful — to calculate each country’s P2P trade volume.” Because, for the most part, P2P trading isn’t reflexed on-chain. Chainalysis admits that “While this means that we aren’t capturing all P2P value, we believe these two exchanges are popular enough for their metrics to act as an overall approximation.

DeFi Is Not Part Of The Studio. DeFi Stats Coming Soon

It’s also worth noting that, “Transactions carried out by DeFi protocol users all show up on-chain, as no centralized service ever takes custody of users’ assets.” That presented a problem, because it “skewed” their rankings “toward countries with comparatively more DeFi users.” So, Chainalysis decided to leave DeFi stats out of this particular studio.

However, they promise. “We also decided to create a new DeFi Adoption Index, which will be available in the coming weeks.

Global Crypto Adoption Index chart - Arcane Research

Global Crypto Adoption Index chart - Arcane Research

Global Crypto Adoption Index 2021 | Source: Arcane Research

Chainalysis Identified Three Key Trends

On-chain analysis reveals that:

  • Global cryptocurrency adoption is skyrocketing

This might sound like an obvious claim, but the surprising thing is the staggering numbers. 

“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, that total score stands at 24, suggesting that global adoption has grown by over 2300% since Q3 2019 and over 881% in the last year.”

  • Adoption in emerging markets grows, powered by P2P platforms

Not everyone has access to a globally accepted bank account. The people who don’t have access to centralized exchanges found a way to participate in the crypto space. And are doing it in a major way. 

  • China and the U.S. dip in our rankings

Not surprisingly, “analysis shows how far P2P volumes have fallen in the two countries compared to worldwide volumes.” However, according to Chainalysis, further considerations indicate that:

“This activity may reflect increasing professionalization and institutionalization of cryptocurrency trading in the United States, and in China’s case may be related to ongoing government crackdowns on cryptocurrency trading.” 

Why are Chinese people abandoning P2P trading so radically? Wouldn’t the “government crackdowns on cryptocurrency trading” cause a surge in old P2P trading instead?

Related Reading | Chainalysis: 2020 Is The Year of The Institutional Bitcoin Investor

In any case, Chainalysis concludes their study with:

“The clear takeaway though is this: Cryptocurrency adoption has skyrocketed in the last twelve months, and the variation in the countries contributing to that show that cryptocurrency is a truly global phenomenon.”

And we couldn’t agree more. It is.

Global Crypto Adoption Index - Chainalysis

Global Crypto Adoption Index - Chainalysis

Global Crypto Adoption Index | Source: Chainalysis
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