Crypto economy is developing fast and according to its proper trends, not always correlated to the global economy. We combed through most interesting reports released recently to give an updated picture of its state.
While the majority of crypto venture capital still comes from the US, country with strong entrepreneurial spirit and long-standing VC tradition, the biggest share of crypto transaction volume (quite surprisingly) is now made in Europe.
This week’s Chainalysis report shows that Europe received over $1 Tr worth of crypto last year (25% of global transaction volume) and, with East Asia’s decline, became world’s leading crypto economy.
This volume was driven by the use DeFi protocols (over 80% of all European transactions) and an increasingly big share of large institutional investors (over 50% of money transfers exceed $10M).
Where do these investors come from? Unsurprisingly, the UK is leading here, paving itself the way for much-awaited rekindling of the City, which has been steadily losing its importance as a world financial center.
As to the coins that are transacting, the most popular one is Ethereum (DeFi oblige…), followed by Bitcoin and stablecoins.
Central & South-East Asia developing
Another region that is worth mentioning is Central & South-East Asia, which saw its crypto transactions volume surging 706% between July 2020 and June 2021. With $572 Bn worth of crypto transactions received, it now makes 14% of the global volume (Chainalysis).
Here too, the growth is marked by an increasing presence of large institutional investors: in India transfers above $10M represent 42% of all transactions, in Vietnam and Pakistan 29% and 28% respectively.
While Europe dominates in crypto transactions volume, Asian countries are leading in terms of grassroot adoption. In an earlier Chainalysis Global Crypto Adoption Index, which measures on-chain value transfers and P2P exchanges volume weighted by the purchasing power parity, Vietnam, India and Pakistan scored in the top 3.
Another indicator of the rising grassroot adoption in the world is the increasing use of Lightning Network. Arcane Research published a study, showing a soaring growth in September - 94% more in payment volume - indicating that more and more people are using LN to send and receive small amounts of bitcoin.
Institutional interest growing
World’s leading cryptoasset funds that allow accredited investors to get crypto exposure without actually buying the coins also note a steady increase in demand. As reported by Coinshares, weekly cryptoasset flow to such funds has been positive for 7 weeks in a row now, with the biggest inflow registered by Grayscale, now managing a whopping $41 Bn.
The Bank of America is becoming clearly fond of crypto. After a somewhat positive report in March, where they nonetheless called Bitcoin “too volatile”, their new report is much more bullish, saying that “Bitcoin is important” and the crypto industry is “too large to ignore” now. They note the DeFi’s rise and the impressive $17 Bn of venture capital poured in it in the first half of 2021, as well as NFTs’ “immense potential” in demonstrating ownership without any sort of middleman.
Smart money keeps investing in crypto, even in countries going through a regulatory turmoil, like the US do now. More and more people compare Bitcoin to the Internet in 1997, and even if Bitcoin users’ growth rate will slow down to the Internet’s pace (it’s actually higher), this will mean 4 Bn users by 2030. Noone wants to miss that.
Art and NFTs
This week New York City saw one of the biggest marketing event dedicated to the digital art. One of the busiest places in the Western hemisphere - Penn Station in Madison Square - hosted the Art in Motion exhibit, where commuters could scan NFT’s QR codes and bid on them on the OpenSea.
New-Yorkers are already well-versed into crypto, with both Democratic and Republican mayor candidates have expressed their crypto-friendly intentions. Next month’s election should be a blast.
Against expectations of many bears, Bitcoin price did not correct, but consolidated nicely this week, marking higher lows and highs and ending at $56’600 level.
Good news were coming from Brazil, where a crypto-friendly law will be presented in the Senate, and the increasing number of endorsements from big finance players. The Bank of America we saw earlier, the U.S. Bank announcing crypto custody services, George Soros revealing that his fund is holding Bitcoin…
Bitcoin market cap is now reaching $1 Tr, exceeding those of Facebook. It is indeed too large to ignore now…
Ethereum price was slowly rising up until Sunday night - the usual disturbance moment - when it briefly lost 5%, only to regain it afterwards. It sits at $3’500 level now.
Quote of the week
“I’m not sure Bitcoin is viewed only as an inflation hedge here. It’s crossed the chasm to mainstream”,
Dawn Fitzpatrick, CEO and chief investment officer of Soros Fund Management (over $28Bn in assets under management)