Crypto adoption worldwide
According to a report by Statista, the number of blockchain wallet users worldwide increased from 6.7 million in Q1 2016 to over 76 million in Q1 2021. The same report also states that the global cryptocurrency market size is projected to reach $2.2 trillion by 2026, growing at a compound annual growth rate (CAGR) of 11.2% from 2021 to 2026. These figures demonstrate a growing acceptance of cryptocurrencies as a legitimate form of payment and store of value.
Global crypto adoption index
The Global Crypto Adoption Index developed by blockchain.com ranks countries based on three key metrics: the number of cryptocurrency users, the number of cryptocurrency ATMs, and the number of merchants accepting cryptocurrency payments. According to the latest ranking, as of Q1 2021, the top five countries with the highest crypto adoption index are Vietnam, India, Pakistan, Ukraine, and Kenya.
What is crypto adoption?
The adoption of cryptocurrencies involves individuals, businesses, and institutions accepting and using cryptocurrencies as a means of payment, store of value, or investment. A report by Finder.com found that as of 2021, around 1 in 10 Americans had invested in cryptocurrencies, with Bitcoin being the most popular cryptocurrency. In addition, more businesses are beginning to accept cryptocurrencies as a form of payment, with companies such as Tesla and PayPal allowing their customers to use cryptocurrencies for transactions.
Latest cryptocurrency adoption statistics for the 10 most popular countries:
- United States:
- 14.8% of the US population owns cryptocurrency.
- Bitcoin is the most popular cryptocurrency in the US, with a 72% market share.
- In 2021, the US had the highest number of cryptocurrency ATMs in the world, with over 17,000.
- Despite the Chinese government’s crackdown on cryptocurrency, around 8% of the population still owns cryptocurrency.
- China is home to the largest mining operations for Bitcoin and other cryptocurrencies.
- Around 11% of the Japanese population owns cryptocurrency.
- Japan is the first country to fully legalize Bitcoin as a means of payment.
- South Korea:
- Over 30% of South Korean workers invest in cryptocurrency.
- South Korea has the highest trading volume of cryptocurrencies in the world, with Bitcoin accounting for over 60% of the market.
- Around 8% of the Indian population owns cryptocurrency.
- India’s Supreme Court overturned the central bank’s ban on cryptocurrency trading in 2020.
- Around 9% of Germans own cryptocurrency.
- Germany recognizes Bitcoin as a “unit of account,” which means it can be used for tax and trading purposes.
- United Kingdom:
- Around 3% of the UK population owns cryptocurrency.
- The UK has a relatively high number of Bitcoin ATMs, with over 300.
- Around 5% of Russians own cryptocurrency.
Crypto adoption among retail and institutional investors in 2022
A report by JPMorgan found that while retail investors currently dominate the cryptocurrency market, institutional investors are increasingly entering the market. The report found that institutional investors’ share of cryptocurrency trading volume has increased from 17% in 2020 to 27% in 2021. The same report predicts that institutional investors’ share of cryptocurrency trading volume will continue to grow in 2022, driven by increasing interest from hedge funds and asset managers.
Crypto Adoption’s Top 10 Challenges:
- Due to their decentralization, security, and privacy, cryptocurrencies, or digital currencies, have grown in popularity. Cryptocurrencies face many obstacles despite their potential benefits. This study will address the top 10 crypto adoption challenges.
- Lack of Understanding: Crypto adoption is hindered by a lack of knowledge about cryptocurrencies, how they work, and their benefits. Cryptocurrencies’ technicalities make many people wary of adopting them.
- Cryptocurrencies are volatile. Cryptocurrencies fluctuate, making them difficult to use for daily transactions. Merchants struggle to accept cryptocurrencies due to their volatility.
- Security: Cryptocurrencies can be hacked. Cryptocurrencies have no central authority to protect them from attacks, making it difficult to recover stolen funds.
- Cryptocurrency regulations are still developing. Businesses and individuals who want to use cryptocurrencies may be uncertain because governments are still trying to regulate them.
- Scalability: Bitcoin’s limited transaction capacity causes delays and high transaction fees during peak usage. Cryptocurrencies may struggle to compete with traditional payment methods.
- Complexity: Buying, selling, and storing cryptocurrencies can be difficult for individuals and businesses. Cryptocurrencies’ technicalities can scare people away.
- Lack of Infrastructure: Cryptocurrencies need strong infrastructure to succeed. Exchanges, wallets, and payment gateways. Lack of infrastructure can make using cryptocurrencies for daily transactions difficult.
- Criminal Activity: Criminals use cryptocurrencies for money laundering and other illegal activities. Businesses may struggle to accept cryptocurrencies due to this perception.
- Banks and credit card companies are slow to adopt cryptocurrencies. This makes using cryptocurrencies for daily transactions difficult for individuals and businesses.
- Lack of Standardization: Cryptocurrencies vary in features and characteristics. Lack of standardization makes it hard for businesses and individuals to choose a cryptocurrency.
Cryptocurrencies must overcome many obstacles to become a mainstream payment method. Lack of understanding, volatility, security, regulations, scalability, complexity, infrastructure, perceived association with criminal activity, resistance from traditional financial institutions, and lack of standardization are these challenges. To improve cryptocurrencies, governments, businesses, and individuals must work together.
What Does It Mean to Truly Adopt Bitcoin?: Truly adopting Bitcoin involves using it as a functional currency for everyday transactions, rather than just as a speculative investment. According to a report by Chainalysis, only about 20% of Bitcoin held as an investment has been used in transactions since its inception in 2009. The report suggests that increased adoption of Bitcoin as a means of payment would help to stabilize its value and increase its use as a legitimate currency.
Factors affecting cryptocurrency adoption: A report by Deloitte identified several factors that can affect the adoption of cryptocurrencies, including regulatory frameworks, merchant acceptance, consumer awareness and education, network scalability, security, and transaction costs. For example, a lack of clear regulations can create uncertainty and deter businesses and individuals from using cryptocurrencies.Over time, more people and businesses are adopting cryptocurrencies. Three trends will boost crypto adoption in 2023.
Institutions and corporations have been adopting cryptocurrency in recent years. In 2023, more institutions and corporations will invest and pay with cryptocurrencies. These institutional players will legitimize cryptocurrencies, making them more appealing to individuals and businesses.
- Central Bank Digital Currencies (CBDCs): Many nations have considered creating their own digital currencies in recent years. More countries will launch CBDCs, a government-backed alternative to cryptocurrencies, in 2023. CBDCs may be better for daily transactions than traditional cryptocurrencies due to their stability.
- DeFi Adoption: Decentralized Finance (DeFi) has been a major cryptocurrency market trend for years. DeFi offers borrowing, lending, trading, and investing without intermediaries. In 2023, more people and businesses will use DeFi platforms instead of traditional financial services. DeFi’s popularity and these platforms’ convenience and affordability will drive this adoption.
In conclusion, institutional adoption, CBDCs, and DeFi will accelerate cryptocurrency adoption in 2023. These trends will make cryptocurrencies more attractive to consumers and businesses.