2021 Global Cryptocurrency Adoption Index: The Conversion of Economic Powers and Emerging Markets

2021 is an extraordinary year for the cryptocurrency industry. In this year, thanks to the characteristics of cryptocurrency peer-to-peer and low transaction fees. As a result, the cryptocurrency market has experienced tremendous growth, and the cryptocurrency/blockchain industry has also gained widespread attention. The adoption of cryptocurrencies in some emerging market countries is also increasing substantially.

According to Chainalysis’s Global Encryption Adoption Index, we can objectively measure which countries (citizens) have the highest cryptocurrency adoption rate. Which countries have made good progress in adopting cryptocurrencies to penetrate mainstream economies? The result may be different from what you think, because it is not necessarily the economic superpower that is leading this process.


Picture: Global Cryptocurrency Adoption Index

The creation principle of the global encryption adoption index

The Global Encryption Adoption Index is composed of three indicators. All 154 countries/regions are ranked according to each of these three indicators, and the average value of each country/region’s ranking in all three indicators is taken, and then the final The numbers are standardized to a range of 0 to 1, providing each country/region with a score that determines the overall ranking. The closer the country’s final score is to 1, the higher the ranking.  

The value of cryptocurrency on the chain received, weighted by purchasing power parity (PPP) per capita

The goal of this indicator is to rank each country/region based on overall cryptocurrency activity, but based on the wealth of ordinary people and the country’s general currency value, the ranking is weighted to favor countries/regions where the amount is more important.

The indicator is calculated by estimating the total amount of cryptocurrency received by the country/region, and the value on the chain is weighted according to the purchasing power per capita. The purchasing power parity per capita is an indicator of the wealth of each resident of the country. The higher the ratio of the received on-chain value to the per capita purchasing power parity, the higher the ranking, which means that if the value of the cryptocurrency received by two countries is equal, the country with the lower per capita purchasing power parity will be ranked higher. 

On-chain retail value transferred, weighted by purchasing power parity per capita

The goal of this indicator is to measure the activities of non-professional individual cryptocurrency users based on the ratio of the cryptocurrency they trade to the wealth of ordinary people. Estimating an individual’s cryptocurrency activity by measuring the amount of cryptocurrency moved in a retail transaction, designating it as any transaction of cryptocurrency worth less than $10,000. Then rank each country based on this indicator, but weight it to favor countries with lower purchasing power parity per capita.

Peer-to-peer (P2P) exchange transaction volume, weighted by per capita purchasing power parity and number of Internet users

Unlike the other two indicators, P2P transaction volume is not represented on the blockchain, but it still accounts for a large proportion of all cryptocurrency activities, especially in emerging markets. Rank countries based on P2P trade volume and weight them to favor countries with lower purchasing power parity per capita and fewer Internet users. The goal is to highlight that more residents use a larger share of their overall wealth for P2P cryptocurrency transactions Country.

Chainalysis’s tool cannot capture P2P transaction volume because it is not recorded on the blockchain-we can only see funds entering or leaving the P2P platform. Instead, they rely on data provided by the two largest P2P platforms-Local Bitcoin s and Paxful-to calculate the P2P transaction volume in each country. Although this means not capturing all the P2P value, these two exchanges are popular enough that their indicators can be used as an overall approximation. This part of the formula may need to be updated in the future to take into account the rise of other P2P platforms, such as those provided by Binance, whose popularity is growing.

How does the methodology of this indicator change in 2021

The biggest change in the methodology of this indicator this year is the removal of the fourth indicator that contributes to the overall ranking of each country in 2020: the number of deposits by country/region is weighted by the number of Internet users.

It was initially used as a metric to determine which countries’ residents have conducted the most cryptocurrency transactions, as this will capture the number of individuals using cryptocurrencies and promote countries/regions where its residents conduct more transactions per user. However, although centralized services such as cryptocurrency deposits in exchanges will appear on the chain, any transactions in these services (such as transactions on exchanges) will not be captured on the chain, but will only appear on these services. In the order book, in some cases, we have limited access rights or even inaccessibility. 

However, DeFi is not the case. The transactions made by users of the DeFi protocol are all displayed on the chain, because there is no centralized service that will keep users’ assets. This tilts our ranking towards countries with relatively large DeFi users. Therefore, the team decided to eliminate it.

Top 20 in Global Encryption Adoption Index in 2021

The following table shows the top 20 countries in the 2021 Global Encryption Adoption Index and their rankings among the three constituent indicators that make up the overall ranking.


The countries in the ranking from high to low are: Vietnam, India, Pakistan, Ukraine, Kenya, Nigeria, Venezuela, the United States, Togo (West African countries), Argentina, Colombia, Thailand, China, Brazil, the Philippines, South Africa, Ghana, Russia, Tanzania, Afghanistan.

Global cryptocurrency adoption rate soars

Data shows that residents of more and more countries in the world are beginning to get involved in cryptocurrencies, which has led to an increase in the current adoption rate of cryptocurrencies. In the figure below, Chainalysis adds up the index scores of all 154 countries/regions for each quarter from the second quarter of 2019 to the present to arrive at the global cryptocurrency adoption rate. 


As can be seen from the picture, by the end of the second quarter of 2020, after a period of small growth, the total global adoption rate is 2.5. By the end of the second quarter of 2021, the total global adoption rate was 24, which indicates that since the third quarter of 2019, the global adoption rate has increased by more than 2300% and last year by more than 881%. Research shows that the reasons for this increase in adoption vary around the world-in emerging markets, many people turn to cryptocurrencies to preserve their savings when currencies depreciate, send and receive remittances, and conduct business transactions, while in North America adopt crypto When it comes to currencies, last year, Western Europe and East Asia were mainly driven by institutional investment. In a year when cryptocurrency prices have risen sharply, the reasons for each region’s own cryptocurrency seem to be convincing. 

With the support of the P2P platform, the adoption rate in emerging markets continues to increase

Several emerging market countries, including Kenya, Nigeria, Vietnam, and Venezuela, rank high in the index. This is largely because after adjusting the per capita purchasing power parity and the population of Internet users, their performance on the peer-to-peer (P2P) platform The trading volume is huge. Our interviews with experts in these countries show that many residents use P2P cryptocurrency exchanges as their main entrance to cryptocurrencies, usually because they cannot access centralized exchanges.

Knowing this, it is not surprising that regions with many emerging markets account for a large portion of the network traffic of P2P service websites.  


Central and South Asia, Latin America, and Africa use more P2P platforms in terms of traffic (number of uses) than in regions with larger economies such as Western Europe and East Asia.

Many emerging markets face substantial currency depreciation, prompting residents to purchase cryptocurrencies on P2P platforms to preserve their savings. Others in these fields use cryptocurrencies for international transactions, personal remittances or commercial purposes, such as buying goods for import and sale. Many emerging markets here limit the amount of domestic currency that residents can transfer out of the country. Cryptocurrency provides these residents with a way to circumvent these restrictions so that they can meet their financial needs. 

This has led to an interesting dynamic that P2P platforms account for a larger share of total transaction volume, which consists of smaller, retail-scale cryptocurrencies worth under $10,000.


Picture: Remittance payments and personal or commercial transactions conducted by merchants in emerging markets are smaller than those conducted by professional traders or institutional investors

China and the U.S. fall in the rankings

Last year, China ranked fourth in the global adoption index, while the United States ranked sixth. This year, the United States ranks eighth and China ranks thirteenth. The biggest reason for the decline in the two countries is their sharp decline in their rankings in P2P transaction volume weighted by Internet use population-China dropped from 53rd to 155th in this regard, while the United States dropped from 16th to 109th. . 

Further analysis shows how much P2P transaction volume in these two countries has fallen compared with global transaction volume. This is demonstrated in the index chart below, which shows the relative changes in P2P transaction volumes in the United States and China compared to the global total.


The P2P transaction volume in the United States and China was roughly the same as the global total, and divergence began to appear around June 2020. By then, as the rest of the world grows, the P2P transaction volume in the United States and China is shrinking. Although all three indicators have fallen sharply starting from March 2021, the decline in the United States and China is even greater, and is still lower than the global total. This activity may reflect the increasing professionalization and institutionalization of cryptocurrency transactions in the United States, and in China, this may be related to the continued government crackdown on cryptocurrency transactions. 

What will drive the next wave of adoption?

Data shows that the ever-increasing transaction volume of centralized services and the explosive growth of DeFi are driving the use of cryptocurrencies in developed countries and countries/regions that have been heavily adopted, while P2P platforms are driving new adoption in emerging markets. The clear conclusion is that in the past 12 months, the adoption rate of cryptocurrency has soared, and the differences in the countries/regions that have contributed to this indicate that cryptocurrency is a truly global phenomenon.


Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/2021-global-cryptocurrency-adoption-index-the-conversion-of-economic-powers-and-emerging-markets/
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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