It is an exciting time in the crypto industry. The much-anticipated The Merge was completed successfully on Thursday, September 15, officially making Ethereum a proof-of-work (PoW) blockchain. In the meantime, the crypto market turbulence continues as most cryptocurrencies start the week in the red. The total crypto market capitalization has once again dipped below the $1 trillion mark leading to over $430 million in liquidations, according to data from Coinglass.
While this may continue slowing down the global adoption of cryptocurrencies, emerging markets seem ready to take up the digital asset class. According to a recent report by Chainalysis, emerging economies have surpassed higher-income countries in a metric that measures adoption.
Emerging Markets Lead in Grassroots Adoption
In a report titled “The 2022 Global Crypto Adoption Index,” blockchain data analysis firm Chainalysis found that emerging markets are at the forefront of crypto adoption. The World Bank (WB) classifies countries into “high income, upper middle income, lower middle income, and low income” based on their “income levels and overall economic development:”
According to the report, lower-middle-income countries like Vietnam, Philippines, Ukraine, India, Pakistan, Nigeria, Morocco, Nepal, Kenya, and Indonesia are among the top 20 ranked countries in crypto adoption. Vietnam holds the number one spot in the overall crypto adoption index. Only eight among the top 20 were from middle-income countries, and two were from high-income countries (the United States and the United Kingdom).
The report also explored what users in lower-middle and upper-middle income countries used crypto for. The results showed that users from these countries relied on cryptocurrencies to hedge against the volatilities of fiat currencies, send remittances and “fulfill other financial needs unique to their economies.” Chainalysis analysts also reported that:
“These countries also tend to lean on Bitcoin and stablecoins more than other countries. Over the coming years, it’ll be interesting to see what solutions the cryptocurrency industry can build to increase adoption in high and low-income countries.”
Vietnam was ranked first in crypto adoption for the second year running due to its high purchasing power and “population adjusted adoption” across centralized finance (CeFi), decentralized finance (DeFi), and peer-to-peer (P2P) crypto payment tools. The U.S. moved up to fifth place on the Chainalysis index rankings, up from eighth in 2021 and sixth position in 2022. Finally, China reclaimed its spot among the top ten of the global crypto adoption index in 2022 after sliding to 13th last year.
Bear Markets Do Little To Curtail Adoption
It is important to note that the ongoing crypto bloodbath may, to a certain extent, affect the adoption of cryptocurrencies worldwide. However, as earlier mentioned, the adoption index remains well above the levels seen before the 2020 bull market. Chainalysis data suggests that many new users who have invested in digital assets during bull markets “ tend to stay even when prices decline, allowing the ecosystem to consistently grow on net across market cycles.”
Chainalysis analysts say this could be attributed to “the value users in emerging markets get from cryptocurrency.” Emerging economies dominate the adoption index primarily because cryptocurrencies offer unique and tangible benefits to people living in what they refer to as “unstable economic conditions.”