Podcast Summary
In this episode of “On the Brink,” host Nick Carter invites Kim Grauer, head of research at Chainalysis, to discuss the 2023 Geography of Crypto Adoption Report. The conversation delves into the global use of cryptocurrency, the methodology for tracking crypto activity, and the challenges of interpreting web traffic data for crypto platforms. The podcast also explores the cryptocurrency landscape in India, the impact of inflation on crypto adoption, and the implications of high interest rates on stablecoin holders.
Key Takeaways
Understanding Global Crypto Adoption
- Global Crypto Usage: The podcast reveals that crypto activity is present in nearly every country, with different countries optimizing for various crypto use cases due to their unique socio-political and economic circumstances. Emerging markets show the highest per capita adoption rates, often in response to inflation, capital controls, and restrictions on international commerce.
- Methodology for Tracking Crypto Activity: Chainalysis combines blockchain data with service attribution to provide insights at the country level. The methodology includes tracking five key variables: C5 value received (retail), C5 value received (non-retail), P2P exchange volume, D5 value received (retail), and D5 value received (non-retail).
- Challenges in Interpreting Web Traffic Data: The use of VPNs can obscure the true geographic source of web traffic and, consequently, the estimation of crypto transaction volumes by country. Web traffic providers are attempting to filter out VPN-distorted data, but this remains a significant challenge in accurately tracking crypto activity.
India’s Crypto Landscape
- India’s Diverse Crypto Growth: India is highlighted as a high performer in the crypto space, not just in one aspect but across various metrics, unlike other countries that may excel in one specific area. The country shows growth in peer-to-peer transactions, decentralized finance (DeFi), non-fungible tokens (NFTs) related to cricket and gaming, as well as finance and institutional investments.
- Impact of Inflation on Crypto Adoption: The podcast discusses the impact of inflation in Turkey and how it drives people to convert their savings from Turkish Lira into cryptocurrencies for better store of value. This trend is likely common in many countries experiencing high inflation.
- Stablecoins’ Growth: Despite challenges in the U.S., stablecoins have seen growth internationally, with offshore issuers increasing their supply. Analysis of North American stablecoin activity shows a shift from U.S.-licensed to non-U.S.-licensed exchanges, possibly due to regulatory pressures.
Implications for Policymakers and Investors
- Impact on Policymakers: The podcast highlights the power of showing real data to policymakers, such as the number of visits to crypto platforms within their jurisdiction, the most popular services, average transfer sizes, and the general usage of crypto. Policymakers around the world often cite the data provided by Chainalysis, which helps advocates within those regions push for appropriate regulation and safe practices.
- Implications for US Policymakers: A negative stance on the crypto industry could lead to a loss of control as activities move to jurisdictions with less stringent regulations. Illicit activities are increasingly channeled through non-US licensed services, raising concerns about the US’s ability to combat illicit finance effectively.
- Impact on Investors: The host shares personal experience, stating that the report is used to inform investment strategies, particularly in determining regional focuses for global investments, highlighting the practical application of the report’s data in decision-making processes.
Sentiment Analysis
- Bullish: The podcast expresses a bullish sentiment towards the global adoption of cryptocurrencies. The discussion highlights the diverse uses of crypto globally, the significant adoption in emerging markets, and the potential of cryptocurrencies to serve as a critical tool in wealth preservation and investment, especially in regions with underdeveloped equity markets. The rapid growth of stablecoin transactions, particularly in regions with fiat on-ramps, also contributes to the bullish sentiment.
- Bearish: The bearish sentiment is primarily directed towards the challenges in tracking and interpreting web traffic data for crypto platforms, especially due to the widespread use of VPNs. The podcast also expresses concerns about the US’s ability to combat illicit finance effectively if a negative stance on the crypto industry leads to a loss of control as activities move to jurisdictions with less stringent regulations.
- Neutral: The neutral sentiment is reflected in the discussion on the limitations and potential biases of the methodology for tracking crypto activity, the need for more rigorous academic research to fully understand crypto adoption trends, and the inherent challenges in measuring economic activity.
