By Fabian Schleifer
Definition of Crypto Adoption
The adoption (rate) of cryptocurrencies is an often-stated metric used to assess the prevalence and dissemination of these in economies and jurisdictions globally. Nevertheless, crypto adoption can refer to many different layers of perspective, whether one is taking a macro view on a whole economy or simply describing the acceptance of cryptocurrencies as a means of payment by businesses, with one layer influencing the other of course. As an example, for the latter one, Tesla’s announcement to accept Bitcoin as payment would be one kind of crypto adoption, potentially leading to more people in the respective economy to hold and trade cryptocurrencies.
Current State
The following results, taken at the time of writing, use surveys and web traffic data to P2P exchange services – which will be explained later – to come up with global rankings. The following are the Top 5 countries in a survey by Finder:
Country | Percentage of people who own cryptocurrencies |
Nigeria | 24.2 % |
Malaysia | 18.0 % |
Australia | 17.7 % |
Indonesia | 16.7 % |
Hong Kong | 15.8 % |
… | |
United States | 10.4 % |
Its observable that cryptocurrencies are more broadly owned in developing countries and markets with above 10 % of people owning any sort of cryptocurrency. Developed countries in Western Europe, the Americas and Asia show rates below 10 %.
The “Global Crypto Adoption Index” by Chainalysis, considering three metrics described below and ranking countries by them, lists the following as Top 5:
Country | Rank |
Vietnam | 1 |
India | 2 |
Pakistan | 3 |
Ukraine | 4 |
Kenya | 5 |
… | |
United States | 8 |
Except for the US on 8th place, the ranking only consists of developing nations and emerging markets, including, maybe unexpectedly, Venezuela on place 7 and Afghanistan on 20. The commonality among emerging economies ranking high is probably attributable to their underdeveloped financial institutions and bank access combined with high adoption rates of internet and mobile services.
Measurement Methodology
While there doesn’t appear to be an industry or academic standard regarding the definition or measurement of the adoption of cryptocurrencies, there are, though, several approaches that are commonly used.
Chainalysis “Global Crypto Adoption Index”
One example is the “Global Crypto Adoption Index” by Chainalysis, a New York, NY based blockchain and cryptocurrency data analysis company that provides fraud detection and compliance services for government agencies and businesses.[1] Their ranking of 154 countries by the following three metrics is cited in many media reports on crypto adoption: [2]
- On-chain cryptocurrency value received, weighted by PPP (purchasing power parity) per capita. This takes a macro view on the total sum of cryptocurrency a country, or its users, received within the observed period, put in relation to the PPP-adjusted GDP/wealth per resident. This adjustment is necessary, according to Chainalysis, to make lower income countries and their volumes comparable, since big, high GDP/capita countries like the US would exceed smaller countries’ absolute values.
- On-chain retail value received, weighted by PPP per capita. In order to account for non-institutional flows (below $10,000 of transaction value), Chainalysis employs this metric, similarly to 1., PPP adjusted to ensure comparability.
- Peer-to-peer exchange traded volume, weighted by PPP per capita and number of internet users. Again, in this metric, countries with a lower PPP-adjusted GDP are considered. Chainalysis stresses that P2P trade volume is significant especially in emerging markets, this probably being due to underdeveloped or corrupted financial markets and institutions.
- A fourth metric had been the number of deposits by country weighted by number of internet users. Since trades within an exchange, so called off-chain transactions, wouldn’t be recorded by this, Chainalysis eliminated it in their 2021 report on crypto adoption.
Survey-based assessment
Surveys are another method to examine how widespread the holding and usage of cryptocurrencies in an economy or country are. Many different institutions conduct such surveys, with the Statista Global Consumer Survey being one example.[3] This survey had 1000-4000 respondents per country and was limited to the online population only, which is an example for empirical issues surrounding every survey. That is, these surveys need to be crucially planned and the sample population carefully selected, since, for example, people who are early adopters of cryptocurrencies in their country necessarily need to be online users and open to new technologies, located in areas with (good) internet access. This could be a confounding factor in measuring crypto adoption in emerging economies where the differences between the rural and urban population is starker.
Another example of empirical crypto adoption measurement is a Google and Qualtrics conducted survey designed by Finder, a financial product comparison and advisory website. The survey has a sample size of 41,645 across 22 countries, with 1,500 – 2000 respondents each, proportional to the population size.[4] It states the percentage of people in a respective country who own cryptocurrencies. Of course, this simple ownership metric is debatable in its representation of actual adoption – in turn dependent on however one defines adoption itself: merely ownership, using cryptocurrencies for everyday transactions, etc.
The Blockchain Research Lab, a German non-profit research organization, pursues an empirical approach in its report on cryptocurrency adoption as well, using a survey in Germany to assess the share of people knowing about and owning cryptocurrencies, as well as the average portfolio size and investment motives.[5]
Data Sources
As outlined above, there are several ways to look at crypto adoption, such as viewing the individual acceptance as a means of payment or settlement by businesses or other transacting parties, or the amount of money and wealth held and traded by residents of an economy in crypto currencies. While the described surveys are a classic method to measure the prevalence of product or service usage, they need to be designed carefully to yield a representative result. Furthermore, surveys only offer limited view on actual transactions, hence rely on qualitative statements given by surveyed persons instead of hard facts taken from e.g., transaction records.
Since one of the basic principles of a blockchain-based cryptocurrency is to offer anonymity amongst transacting parties, its not easy to determine in which countries respective parties trade or where wallets are stored. Of course, there exist centralized exchanges for cryptocurrencies such as Coinbase or Binance. Unless VPN usage is widespread, these companies possess data about the geography and intensity of transactions on their platforms, but usually this data is not made public.
According to Chainalysis,their statistics mostly rely on web traffic data to Peer-to-Peer exchanges. In evaluating this web traffic, they induce the activity on them, which of course is prone to inaccuracies. Theseanalysis methods – them being their main business model –seem to consist of proprietary access or technology to precisely determine the location and transaction data of several crypto exchanges as well as on-chain data.[6]
As this article tried to examine what exactly crypto adoption entails, how it is measured and the current outcomes of these measurements, the proliferation of cryptocurrencies around the world is a moving target. Time and competition amongst cryptocurrencies themselves, regulators and businesses will tell which areas of an economy, or which countries, as El Salvador recently, will adopt cryptocurrencies instead of our present-day fiat money. While there is not one single statistic that will give a satisfactory measurement of how advanced the spread of cryptocurrencies is, the presented metrics should give a rough estimate.
[1] See Geography-of-Cryptocurrency-2021.pdf (chainalysis.com), accessed on October 28, 2021.
[2] See https://www.nasdaq.com/articles/bitcoin-adoption-surged-880-in-one-year-emerging-markets-lead-the-way-2021-08-19 and https://www.bloomberg.com/news/articles/2021-08-18/crypto-adoption-by-individuals-growing-fastest-in-vietnam-india (both accessed on October 26, 2021).
[3] Buchholz, K. (2021). How Common is Crypto?. Statista. Statista Inc.. Accessed: October 26, 2021. https://www.statista.com/chart/18345/crypto-currency-adoption/
[4] See https://www.finder.com/finder-cryptocurrency-adoption-index, accessed on October 26, 2021.
[5] See https://www.blockchainresearchlab.org/wp-content/uploads/2019/07/The_State_of_Cryptocurrency_Adoption_Q1_2019_Germany_Blockchain_Research_Lab.pdf
[6] https://markets.chainalysis.com/ offers many interesting metrics. When clicking on the information icon next to a metric’s title, it is being explained by which values this was calculated, as well as the additional statement “[…] on all exchanges covered by Chainalysis.”