Finance & Economics

Bear Market Is Driving Crypto Adoption In Emerging Economies


Max Krupyshev
Author


 

It’s safe to say that the last couple of months have been a nightmare for crypto investors, with millions of them seeing their portfolios more in the red than ever before. But it’s not all bad news, on the contrary, while the market bleeds crypto usage keeps growing. 

crypto

Understanding the difference between Bullish and Bearish markets in cryptocurrency. Source: depositphotos.com

Our internal statistics show that there have been almost 9 million crypto transactions in H1 2022, for a total value of €5.6 billion. Even more remarkably, the volume and number of transactions increased by 180% and 140% respectively, compared to the same period in 2021 when the economic situation looked a lot better.

In other words, we can see that, despite the negative market events, the usage of crypto keeps growing. This is particularly true for emerging markets that are experiencing high levels of inflation.

For example, in Argentina, inflation has been a huge issue since 2016 and has risen to almost 200%, bringing millions below the poverty line. Citizens have started using stronger currencies, mainly the US dollar, as well as stablecoins to safeguard their savings. Because of this crypto penetration has reached 12%, twice that of neighboring countries.

Argentina is not alone, many more emerging countries such as Turkey, Nigeria and El Salvador have been putting their trust in crypto in these turbulent times, but let’s take a look at what exactly is driving this trend.

Crypto Benefits

Inflation Hedge

Inflation can bring a nation to its knees and has done so many times in the past. Nowadays inflation is rising all over the world and some countries, such as Argentina and Turkey, have been suffering a lot. That’s why more and more people around the world experiencing high inflation have resorted to using stablecoins of just stronger currencies than their native ones

Low Fees and Ease of Use

The P2P nature of cryptocurrency means that transactions don’t pass through a centralized institution. Every coin sent through a blockchain goes directly to the other party, saving both time and fees. Sending money to a person on the other side of the world via your bank account takes days and costs a lot in fees. On the other hand, using crypto will only take up to 1 hour and usually cost you just a couple pennies.

Crypto Investment Possibilities 

With crypto breaking into the mainstream, being recognized as a digital asset-friendly country means setting yourself up for a future of riches. Many governments such as El Salvador are staying ahead of the times and taking the necessary steps to promote crypto investments in their country.

More Accessibility

There are currently 1.7 billion unbanked people around the world. To put that into perspective, almost 1/4 of the global population lives in countries that still don’t have the necessary infrastructure to provide bank services to their citizens. Crypto helps in solving that, allowing people to become their own bank, and all they need is a cell phone for a wallet. Exchanging crypto does not require a middleman such as a bank, effectively rendering a lot of its services obsolete. Even governments such as Nigeria and El Salvador are experimenting with solving their unbanked problem by relying on state crypto wallets and incentivizing their use.

Drawbacks

Lack of Regulations

Because regulators are always somewhat behind the developing technologies, the crypto market still lacks concrete rules. This puts investors at risk due to scams and market manipulation, and is undoubtedly hampering crypto adoption. To make matters worse, each country has a different set of regulations, making global integration very complicated. 

Crypto Risk

When most people think of cryptocurrencies, the first thing that comes to mind is often the risk associated with this space. Digital assets are known to be volatile and unpredictable, way too much to handle for the Average Joe. On top of that, scams and hacks are still all too common in the crypto space, making it seem untrustworthy in the eyes of many.

Conclusion

The potential crypto has to change the world goes above and beyond a simple price chart. Prices may go up and down, but the underlying blockchain technology remains unchanged. In fact, crypto can even flower in times of economic turmoil, as the case of Argentina proves. Bottom line is that people can benefit immensely from this technology and its application in finance, no matter the price of individual coins or the economic conditions. 

Cryptocurrency is no longer a niche subject that only a handful of people understand, but a mainstream phenomenon that is progressively taking its rightful place as an influential piece of the global financial market.

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