Global crypto adoption slowed as asset prices fell
As crypto prices fell, so did enthusiasm for digital assets around the world.
An index measuring “where most people spend the largest share of their money in cryptocurrencies” fell year over year in the second quarter but remains above pre-bull market levels, according to Chainalysis.
The majority of crypto adoption over the past year occurred in the fourth quarter of 2021. Since then, the rate of adoption has slowed and then stabilized, with similar adoption recorded in the first and second quarters of this year, according to Kim Grauer, Chainalysis’ director of research.
The decline occurred as the total cryptocurrency market capitalization fell 37% year-over-year, underscoring the inherent risk in these assets.
“A lot of crypto is still speculative,” Grauer said. “No matter where you are in the world [and] the daily way [people] choose to spend their money is affected by it.”
The index assesses the use of digital assets across 154 countries and compares them using five different “sub-indices”, including cryptocurrency value received by centralized exchanges, peer-to-peer marketplaces and DeFi protocols, all of which are weighted by purchasing power parity (PPP). . ) per capita, a metric economists use to compare living standards between countries.
Overall, lower-middle-income countries such as Vietnam, Ukraine, India, Pakistan, Nepal and Kenya continue to lead the rankings over the past year. Adoption in China also appeared to have grown, despite a ban on crypto mining and trading a year ago.
In general, countries exhibiting more restrictive capital controls seem to emerge as a trend among higher rates of crypto adoption.
As an example, the index found that Argentina (ranked No. 13 by the index), which faces the prospect of a 90% annual inflation rate by the end of the year and steep capital controls on the use of the US dollar https://finance.yahoo.com/news/global-crypto-adoption-175414638.htmlhad the highest number of people using cryptocurrency as an inflation hedge.
Russia, which was ranked 18th in last year’s index, took 9th place for 2022. After banning cryptocurrency mining and trading a year ago, China also advanced in rankings from thirteenth to tenth country where cryptocurrencies are most widely used.
“I think there’s quite a bit of business happening on the cryptocurrency track when China is a counterparty,” she said, pointing to imports in Nigeria and Brazil, as well as “funds moving between China and Russia in a business capacity.”
In other countries, based on anecdotal interviews with regional experts, Chainalysis found that as crypto prices fell, NFTs dominated the use of crypto over the past year in such forms as “play to earn” game objects and sports-themed trading cards.
“This is a new class of users coming into crypto from emerging markets who might not have come in if there was no alternative use case besides just speculation,” Grauer told Yahoo Finance.
On the other hand, the adoption in the US varies more towards innovation with a higher concentration of “technical talent” and “a lot of money” which has network effects where people invest in less accessible parts of the market for average users, such as decentralized finance (DeFi), in hopes of finding or building “the next killer app,” according to Grauer.
After finding last year that 16% of US adults said they have invested in cryptocurrencies, a follow-up survey conducted by Pew Research in July found that 46% of respondents who invested in crypto last year said their investments have performed worse than expected .
“We’ve seen stagnation in the U.S. in recent months, and we need time to see if that continues,” Grauer said, suggesting that the stagnation may be related to Americans already having adequate banking infrastructure and on the technology side, but not “themselves” that the next big development that really attracts more people to use cryptocurrency.”
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David Hollerith is a senior reporter at Yahoo Finance covering cryptocurrency and stock markets. Follow him on Twitter at @DsHollers
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