In this exclusive piece, we delve into the latest trends in to provide a concise overview of the developments over the past year as we emerge from the crypto winter. crypto adoption Here is a rundown of the highlights: After setbacks last year, grassroots crypto adoption (average, everyday people adopting crypto) dipped in Q1 and Q2. Activity has however rebounded fueled by U.S. speculations. Crypto Adoption rates dropped in Q1 & Q2 2023: Bitcoin Spot ETF North America, led by the United States, still dominates the global crypto transaction volumes with a total of  24.4% of the total volume. North America's Dominance: Lower-middle-income (LMI) countries like India, Vietnam, and Nigeria outpace more developed counterparts in crypto adoption Emerging Nations Leading Adoption: The drop in stablecoin adoption in North America can primarily be attributed to regulatory concerns. In contrast, Latin America, facing high inflation, shows rising demand for stablecoins. North America’s Stablecoin demand dips, Latin America soars: The CNWE is one of the three regions where the regional year-over-year (YoY) growth of value sent to DeFi protocols saw an increase, alongside Central & Southern Asia, Oceania, and Eastern Europe. DeFi Adoption Slowed down, but not everywhere: Crypto ownership leans heavily towards males (74%) and individuals aged 18-34 (53%), signaling a significant gender gap and higher adoption among millennials and Gen Z. Crypto Demographics: Participants speculate that approval of a U.S.-based spot Bitcoin ETF could attract increased institutional adoption. Microstrategy added 6600 BTC in Q3. Institutional Bitcoin Adoption: The main factors driving adoption include hedging against inflation, remittances, gaming, gambling, and crypto seen as a store of value or portfolio diversification. Main Drivers for Adoption: The Global Index Score by Quarter Declined in Q1 & Q2 2023 The global crypto adoption index score is a metric that crypto analysis firm Chainalysis uses to rank which countries are leading in grassroots crypto adoption. This score is made up of five sub-indexes but leverages three major datasets; on-chain retail value received at centralised exchanges, P2P exchange trade volume, and on-chain crypto value received from DeFi protocols. In Q1 and Q2, the global index score dropped to around 0.36. This is less than half what the score was during the 2021 bull market highs. However, the trend might soon change, given that market activity has bounced back on speculations of a possible Bitcoin Spot ETF approval in the U.S. as early as 2024. North America Enjoys the Lion’s Share in Transaction Value North America, led by the United States, still dominates the global crypto transaction volumes with a total of  24.4% of the total volume. North America is followed by Central, Northern, and Western Europe, while Sub-Saharan Africa accounts for the least share. Notably, over 50% of the transaction volume and value in North America is attributed to large institutions (>10M), indicating rising crypto adoption by institutions in this region despite the uncertainty in regulatory frameworks. Should Blackrock’s spot Bitcoin ETF be approved, we are likely to see more capital inflows from the traditional players who hold trillions of dollars in AUM. Source: Chainalysis Emerging Markets Leading Crypto Adoption According to the index ranking by Chainalysis, lower-middle-income (LMI) countries are adopting crypto assets at a faster rate than their advanced counterparts. India ranked as the number 1 jurisdiction in crypto adoption, followed by Vietnam and Nigeria. Out of the top 10, only the United States falls above the upper-middle-income classification. Notably, while transaction volumes took a nosedive in most countries, there were, however, a handful of LMI countries that recorded positive year-over-year (YoY) growth in crypto transaction volume. They include Vietnam, Nigeria,  Taiwan, and Indonesia. Source: Chainalysis Stablecoin Adoption Declined in North America, Surged in Latin America Another intriguing trend is the shifting dynamics in stablecoin adoption. In North America, the share of stablecoin transaction volumes dropped from 70.3% to 48.8%; this can be primarily attributed to the regulatory stance taken by authorities in the U.S., who have been against stablecoins, particularly after the collapse of SVB, Signature, and Silvergate, which temporarily caused USDC to depeg. Source: Chainalysis Contrastingly, in Latin America, especially countries like Argentina and Venezuela, which have been plagued by high inflation rates, the demand for stablecoins is on the rise. Most people in these economies are turning to USDC or USDT as a safe haven against currency devaluation, with some immediately converting their salaries into USD-backed stablecoins. Argentina is Worth Paying Attention to It will be interesting to watch how things unfold in Argentina, which recently elected the  Pro-Bitcoin President, Javier Milei. Already, there was a clear trend that as the Peso lost value, crypto purchases increased. Whether or not President Javier Milei will favor crypto adoption remains uncertain, but what is certain is that crypto is turning out to be a preferred store of value in Argentina hence the increase in adoption. Source: Chainalysis DeFi is Still a Gateway for Adoption Since the crypto market peaked in November 2021, the total value locked (TVL) has dropped from the highs of $180 billion to $47 billion as of writing. However, this is not to say that DeFi adoption has been stagnant; in Central, Northern, & Western Europe, DeFi accounted for 54.8% of the total value of crypto assets received. The CNWE is one of the three regions where the regional year-over-year (YoY) growth of value sent to DeFi protocols saw an increase, alongside Central & Southern Asia, Oceania, and Eastern Europe. Source: Chainalysis Crypto is a Young Lads Game According to , a survey done in the U.S towards the end of 2022 revealed that only 9% of the respondents have exposure to a crypto asset. Statista 74% of the respondents who own crypto were male, which shows there is still a huge gender gap in crypto adoption and ownership. 53% of the respondents who own crypto are between the age of 18 - 34, 35% were between 35 - 54 while the remaining 12% were above 55 years. Clearly, crypto adoption is more prevalent amongst millennials and GenZ compared to the older generations. Source: Statista Institutions Are Coming for Your Bitcoin! It is no secret that institutions are positioning themselves to get more crypto exposure; in Q3 alone, Microstrategy added over 6600 BTC to its portfolio and now holds 158,400 BTC at an average entry price of $29,609.65. As mentioned earlier, the approval of a U.S Spot Bitcoin ETF will attract more institutions into the space. For more insights on the state of crypto institutional adoption, we published an in-depth in August 2023 covering the rise of institutional crypto adoption. article Source: Coingecko Main Drivers for Crypto Adoption Several factors are driving the adoption of crypto assets, here are some of the major catalysts in this paradigm shift: From the analysis, it is quite clear that most of the countries that are leading in adoption are facing inflation or currency devaluation. A few of the examples that ranked in the top 20 include Nigeria, Turkey and Argentina. Hedging Against Inflation or Currency Devaluation: The global remittance market was valued at $830 billion in 2022, but while remittances play a major role in countries such as Mexico, sending money back home can cost as much as 6.3% according to a World Bank report. That being the case, it is not surprising that Latin American countries are aggressively adopting crypto for remittances. Remittances: While the may have slowed down activity, there is still a significant influence in adoption. In the Philippines where Axie Infinity was at some point the most popular game, 19% of the country’s crypto-related traffic targets gaming and gambling-related products. Gambling, Gaming, and Speculation: NFT bear market This year alone, BTC is up over 120%, making it one of the best-performing assets if not the best. A by Nasdaq last year revealed that 72% of financial advisers would likely allocate some capital to crypto if the U.S authorities were to approve an ETF. Store of value or portfolio diversification: survey Conclusion The path to mainstream adoption in the crypto market is still long. Notably, significant hurdles exist in on and off-ramping, with many crypto companies lacking access to reliable banking facilities or financial service providers. Additionally, regulatory inertia, particularly in the U.S., has led to a mass exodus of crypto companies seeking more favorable environments abroad. \To propel crypto adoption into the mainstream, these critical issues must be tackled. This could involve innovative solutions, such as the alternative banking platform we are launching at , or a collaborative effort by all stakeholders to establish standardized frameworks for jurisdictional operation. Peanuds Also published . here Stay Updated - Follow me on Twitter! Enjoyed these insights? There's more where that came from. Follow me on for daily tidbits and updates. Twitter/X

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Unpacking the Rollercoaster of Crypto Adoption in 2023

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Ulrik Lykke

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