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The purpose of this article is to highlight the biggest cryptocurrency markets in terms of adoption and crypto merchants available, while recognizing the inherent difficulty in tying virtual data to a geographical location.
For a clearer picture of the situation it is worth defining the different reasons why people might get in the bitcoin space, even if in most cases bag holders value the currency for all its features:
- Financial Freedom
This is the case for people looking for an alternative to a disadvantageous banking infrastructure, expansionary monetary policy and for a hedge against inflation.
Another feature to be included in this segment is the importance of privacy regarding personal finances and transactions, not for illegal purposes but for financial freedom against draconian governmental regulation.
- Investing & Trading
Whether it was based on the fundamental value of the technology or for pure speculation, realized and potential ROI has largely been the biggest driver of adoption in recent years.
- Illegal activities
Every few months US government agencies auction significant amounts of BTC from drug related busts and there is a good reason for that, the bitcoin blockchain is public and transactions can be followed.
It is no secret that cryptocurrencies are being used for all sorts of criminal activities around the world, but FIAT currencies held in banks like HSBC are still the favourite choice for money laundering.
It is not easy to estimate how many crypto owners there are in a determined country, without having access to private data from centralized exchanges or individual tax reports.
Several articles about the subject tried to estimate crypto adoption based on publicly available data on the number of bitcoin merchants per country. This approach is flawed in the sense that the availability of bitcoin ATM’s in a country is not an indicator of an increased adoption but evidence of a lack of a more convenient and regulated infrastructure to buy BTC.
There are however some key points that might share more light on the subject:
“According to the CEO of Binance, the number of accounts from a country on Binance correlates positively with the GDP per capita (high GDP – more accounts)”
This doesn´t only highlight the fact that affluent countries have higher disposable income to be invested in cryptocurrencies. It also highlights the fact that such countries may have a better banking infrastructure to be able to access crypto services.
Hedge on Inflation
On the other side of the spectrum, citizens in countries with high inflation that don’t possess such favourable infrastructure have a higher incentive in seeking alternative currencies to preserve their purchasing power over time. Highly active countries in crypto mining and holding, like Argentina, Venezuela, Iran and Lebanon have all seen at least one occasion, the effects of sanctions, inflation, bank runs and subsequent withdrawal restrictions “Corralitos” on their bank accounts.
Financial crisis and abusive banking measures are not exclusive to developing economies as evidenced by the Greece and Cyprus seizing of bank account funds in the last decade. This is exactly why Satoshi Nakamoto created BTC, to empower regular people by getting back financial freedom.
So far, the evidence points out that Bitcoin is adopted as an investment vehicle in affluent countries and more as a hedge on inflation and restrictions on less affluent countries; but there is still a basic requirement that is lagging adoption in poorer countries:
If you are reading this, you are probably in the group of people who take the Internet for granted. According to Internetworldstats.com the average World Internet penetration in 2019 stood at 55.3%:
87.7% in Europe,
77% in America (North, South, Central & The Caribbeans)
70% in the Middle East
68% in Oceania
55% in Asia and
39.3% in Africa
If we consider the hedge on inflation use case for crypto adoption, Africa should have widely adopted cryptocurrencies at least at the levels similar to some South American countries but it hasn't. The reason can be easily deducted if we dive in
The Internet Statistics by country. Out of the 58 countries on the list, only 15 countries (such as Nigeria and South Africa) have a penetration equal or higher to 50% which deeply impacts the capacity of its citizens to learn and use cryptocurrencies.
While it is complicated to estimate the exact numbers of crypto holders in a determined country with public data, we have a clear idea of the mixture needed to brew crypto adoption: Economic uncertainty, investment mindset, financial literacy or access to it through the internet.
The question will be if the next 2 years of COVID and its different aftermath in each country, will do for the economy and how it will drive crypto adoption.