Blockchain analytics platform, Chainalysis has released its Global Crypto Adoption Index for 2022. Among other shockers, perhaps the most significant is that Nigeria, Africa’s largest crypto market has dropped out of the top ten list and moved down to the 11th position.
Recall that the 2021 global crypto adoption Index by Chainalysis placed Nigeria in the 5th position and Kenya in the 6th position. And a year after, both leading African countries were relegated from the list of the leading countries in the world. Now, Kenya holds number 19 and Morocco has joined the top 20 with a surprising overtake of Kenya to the 14th position.
In reaction, industry observers are curious about the cause of the decline. Could it be that Africans are less vested in crypto than they were doing a year ago or that other countries across the globe have significantly upped their games?
Below is a bit of deep dive:
More on the Chainalysis report
The 2022 Global Crypto Adoption Index, published last Wednesday, is a part of the 2022 Geography of Cryptocurrency Report by Chainalysis that will be released later.
The Index is prepared based on different metrics weighted by purchasing power parity (PPP) per capita. The five metrics used for the survey and report are on-chain retail value received at centralised exchanges, P2P exchange trade volume, on-chain cryptocurrency value received from DeFi protocols, and on-chain retail value received from DeFi protocols.
According to the Chainanalysis report, the goal of releasing the report annually is to help countries keep tabs on their performance year on year:
“The goal of this sub-index is to rank each country by total cryptocurrency activity occurring on centralized services, and to then weight the rankings to favour countries where that amount is more significant based on the wealth of the average person and value of money generally within the country,”
According to the report, Vietnam is the global leading destination for cryptocurrency. The country topped the Index last year too. This year, it was followed by the Philippines and Ukraine.
The list has India at the 4th, the United States at the 5th, China at the 10th, and the UK at the 17th position in an Index containing 146 countries. Here is a view of the top 12 countries on the index.
The 2022 Index indicates that the crypto adoption rate has slowed down globally overall. This may be owing to the unremitting bearish market conditions. There are no indications that the overall cautious approach may become better although prices of crypto coins are still better than what they were at the earliest time of the crash.
According to the report:
“Global adoption of cryptocurrency reached its all-time high in Q2 2021. Since then, adoption has moved in waves. Still, it’s important to note that global adoption remains well above its pre-bull market 2019 levels,”
As a key takeaway, the blog suggests that emerging markets dominate the Global Crypto Adoption Index. The top 20 contains 10 countries from lower middle income, 8 from upper-middle income, and 2 from high-income countries.
The report also highlights the leading purpose for adoption around the world. It explains:
“…users in the lower middle and upper middle-income countries often rely on cryptocurrency to send remittances, preserve their savings in times of fiat currency volatility, and fulfil other financial needs unique to their economies. These countries also tend to lean on Bitcoin and stablecoins more than other countries,”
Furthermore, the report indicates that the falling prices in the market have not dampened the enthusiasm of new users. Those who put their money into cryptocurrency during the bull market are likely going to remain invested even when the prices have fallen.
This is because the motivations for buying crypto for the people stems from the need to escape the economic instability in their countries.
“One reason for this could be the value that users in emerging markets get from cryptocurrency. These countries dominate the adoption index, in large part because cryptocurrency provides unique, tangible benefits to people living in unstable economic conditions,”
Why did Nigeria drop out of the top ten?
The decline of Nigeria in the 2022 Global Crypto Adoption Index is basically owing to the change in metrics by Chainalysis.
While the 2021 report focused on crypto adoption by ordinary people and use cases related to transactions and individual savings to determine its ranking, the 2022 index paid more attention to where the most people are putting the most significant share of their money into cryptocurrency.
This means that the 2022 index prioritises institutional activity.
According to Senator Ihenyen, the president of Stakeholders in Blockchain Association of Nigeria (SiBAN), Nigeria remains the largest crypto market in Africa. For him, the decline according to the Chainalysis report is because the metrics upon which it is predicated is far from Nigeria’s strong areas.
“The major reason Nigeria is not in the first 10 is that the Chainalysis report looked beyond the areas where Nigeria is known to be very strong. For instance, while Nigeria scores highly in grassroots adoption with its ever-growing P2P market, Nigeria is not as strong when it comes to other areas such as centralized retail transactions, DeFi, and institutional adoption”, he explains
He says Nigeria has a low purchasing power compared to other countries on the list such as the United States, Indonesia and Brazil. So Nigeria relies on crypto to remit money, hedge inflation and pay for cross-border services mostly through P2P exchange.
“This is where we are strongest. And this is why for example the United States, which is currently ranked 3rd on the global crypto index, ranks 111th when P2P transactions are solely considered. Nigeria even beats Vietnam, the no. 1 country in crypto adoption, in P2P crypto transactions.”
He expects Nigeria to climb up the index gradually as adoption continues to grow, especially in the aspect of centralised retail crypto transactions and DeFi transactions.
“Institutional adoption in Nigeria, as long as the CBN is yet to change its stance on crypto, will continue to be impaired. Although with the new SEC rules on digital assets in Nigeria, I expect some little gains in institutional adoption, but again if the CBN supports the SEC by ensuring licensed operators have access to bank accounts”, he adds.
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