Crypto’s Future: Adoption, Inflation, and Bitcoin’s Role
There’s a phrase that is often repeated from the crypto ecosystem: cryptocurrencies are the future. In our opinion, this phrase is not without merit, as it represents a useful technology, not only for investment and the financial system, but also for solving many other everyday problems, such as managing private data. To get to where we want to be, it’s important to understand where we are today, so let’s discuss the current adoption of cryptocurrencies.
According to the latest data from a Chainalysis report in September 2023, the countries with the highest adoption are India, Nigeria, and Vietnam. The top 20 countries include the United States, Turkey, Argentina, Mexico, Brazil, and the Philippines.
Several reports and data on adoption have been published this year, with varying results. This raises a fundamental question: how is this adoption measured and what data is it based on? In the Chainalysis report, adoption is based on five key concepts, all weighted by PPP (purchasing power parity) per capita:
– On-chain cryptocurrency value received on centralized exchanges
– On-chain retail value received on centralized exchanges
– Trading volume on peer-to-peer (P2P)
– On-chain cryptocurrency value received from DeFi protocols
– On-chain retail value received from DeFi protocols
It’s important to note that both centralized and DeFi protocol metrics are considered. For DeFi metrics, the top five countries remain relatively consistent, with India, the United States, Vietnam, Nigeria, and Indonesia leading the way.
Building on the current adoption, we want to analyze the use of cryptocurrencies as a store of value, using bitcoin as a reference. It’s interesting to observe their utility in countries with high inflation rates, some of which are among the top 20 in adoption. Let’s examine the cases of Nigeria, Turkey and Argentina, where the cumulative inflation for the year 2023 has reached 21.4%, 49.9% and 103.2%, respectively.
The growth of bitcoin in relation to the US dollar this year has been 106.27%. However, it’s evident that when compared to the currency of these three countries, the growth has been significantly higher. For example, comparing bitcoin to the Argentine peso, it has seen an impressive growth of 308.45% since January 1st of this year. Looking at the last five years, the growth was a remarkable 5237.82%.
In Turkey and Nigeria, the trends follow a similar path, although with slightly lower growth due to lower inflation rates in these countries. In Turkey, growth (in terms of Turkish Lira) has been 213.54% year-to-date and 2708% over the past five years. In Nigeria (in terms of the Naira), the growth is 263% since the beginning of the year and 1069% over the last five years.
As seen, bitcoin is serving a practical purpose in these countries as a hedge against rampant inflation caused by poor government policies in recent years. Decentralized Finance (DeFi) not only serves this purpose, but also provides open access to dollars in these economies, providing a means to hedge against inflation.
Once funds enter the realm of decentralized finance, regardless of their domestic currency, users have the freedom to choose between using dollars, bitcoin, ethereum, or any other available cryptocurrency or fiat. In addition, they can exchange for euros using the emerging stablecoins based on that currency. The stablecoin market is steadily growing, providing easy access to currencies like the yen or the rupee, each with its corresponding stablecoin. These non-dollar based stablecoins are gaining traction and we are confident that the market will continue to grow in the coming years.
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