The 2022 Global Crypto Adoption Index: Emerging Markets Lead in Grassroots Adoption, China Remains Active Despite Ban, and Crypto Fundamentals Appear Healthy

This blog is an excerpt of our upcoming 2022 Geography of Cryptocurrency Report. Sign up here to reserve your copy today!

We’re excited to share with you Chainalysis’ 2022 Global Crypto Adoption Index. For the third consecutive year, we ranked all countries by grassroots cryptocurrency adoption. In this blog, we’ll cover:

What is grassroots adoption of cryptocurrency? 

Think of it this way: We could easily rank countries by raw cryptocurrency transaction volume, which would give you a straightforward view of where the most cryptocurrency activity is happening. But that’s not what we’re interested in. The goal of our index is to measure where the most people are putting the biggest share of their money into cryptocurrency. While institutional activity is important to that, we also want to highlight the countries where individual, non-professional investors are embracing digital assets the most. You can read our methodology below to learn how we do that, then keep scrolling to see the top 20 of our index. You can also see where any country ranks using the interactive map above.

Our methodology

Our Global Crypto Adoption Index is made up of five sub-indexes, each of which is based on countries’ usage of different types of cryptocurrency services. We rank all 146 countries for which we have sufficient data according to each of those five metrics, take the geometric mean of each country’s ranking in all five, and then normalize that final number on a scale of 0 to 1 to give every country a score that determines the overall rankings. The closer the country’s final score is to 1, the higher the rank.

In order to calculate our sub-indexes, we estimate countries’ cryptocurrency transaction volumes for different services and protocols based on the web traffic patterns of those services’ and protocols’ websites. Relying on web traffic data means that usage of VPNs and other products that mask online activity, but given that our index takes into account hundreds of millions of transactions, VPN usage would need to be extremely widespread to meaningfully skew our data. Experts we interviewed for the report generally agreed that our index matches their perceptions of the markets they operate in, giving us more confidence in the methodology.

Below, we lay out our five sub-indexes and how they’re calculated.

On-chain cryptocurrency value received at centralized exchanges, weighted by purchasing power parity (PPP) per capita

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 favor countries where that amount is more significant based on the wealth of the average person and value of money generally within the country. We calculate the metric by estimating total cryptocurrency received by users of centralized services in each country, and weighting the on-chain value based on PPP per capita, which is a measure of the country’s wealth per resident. The higher the ratio of on-chain value received to PPP per capita, the higher the ranking, meaning that if two countries had equal cryptocurrency value received, the country with the lower PPP per capita would rank ahead.

On-chain retail value received at centralized exchanges, weighted by PPP per capita

The goal of this metric is to measure the activity of non-professional, individual cryptocurrency users at centralized services, based on how much cryptocurrency they’re transacting compared to the wealth of the average person. We approximate individuals’ cryptocurrency activity by measuring the amount of cryptocurrency moved in retail transactions, which we designate as any transaction for under $10,000 USD worth of cryptocurrency. We then rank each country according to this metric but weight it to favor countries with a lower PPP per capita.

Peer-to-peer (P2P) exchange trade volume, weighted by PPP per capita and number of internet users

P2P trade volume makes up a significant percentage of all cryptocurrency in emerging markets. For this sub-index, we rank countries by their P2P trade volume and weight it to favor countries with lower PPP per capita and fewer internet users, the goal being to highlight countries where more residents are putting a larger share of their overall wealth into P2P cryptocurrency transactions.

On-chain cryptocurrency value received from DeFi protocols, weighted by PPP per capita

DeFi has been one of the fastest-growing areas of cryptocurrency over the last two years. In fact, as we see in the case of DEXs vs. CEXs, decentralized cryptocurrency protocols, which primarily use Ether as opposed to Bitcoin, have now overtaken centralized services in on-chain transaction volume. Given the importance of DeFi to innovation in cryptocurrency, we wanted our adoption index to highlight countries where users are concentrating a disproportionately high share of their financial activity in DeFi protocols. For this sub-index, we rank countries by their DeFi transaction volume, with weighting to favor countries with lower PPP per capita.

On-chain retail value received from DeFi protocols, weighted by PPP per capita

Just as we want our index to incorporate the activity of non-professional, individual cryptocurrency users on centralized services, we want to do the same with DeFi. So, this sub-index ranks each country by DeFi transaction volume carried out in retail-sized transfers, weighted to favor countries with lower PPP per capita.

How our methodology changed this year

The biggest change to our index methodology this year is the addition of two sub-indexes based on DeFi transaction volume, and the modification of two other sub-indexes to include only transaction volume associated with centralized services. We did this for two reasons: First, as we explain above, to highlight countries leading the way in DeFi given its importance to the overall cryptocurrency ecosystem. Second, we wanted to address the issue of DeFi-driven inflation of transaction volume. Deposits to and withdrawals from centralized services show up in on-chain transaction volume, but transactions within those services, such as trades on a centralized exchange, do not. Centralized services track that transaction volume internally, such as in order books for exchanges, meaning we don’t have access to it. This is not the case with DeFi protocols. Because DeFi protocols are non-custodial and simply route cryptocurrency between private wallets, all DeFi transactions show up on-chain. That means that if you’re using on-chain data, DeFi protocol transaction volumes will receive a bump that volumes associated with centralized services don’t receive. In the context of this index, that could lead to us artificially favoring countries with higher DeFi adoption over ones with more activity on centralized services, even if the amount of real transaction activity is the same. 

In order to address this, we decided to measure each country’s CeFi and DeFi transaction volumes separately — both in total and at the retail level — and use them as equal components of the overall index. This way, every country’s transaction volume is compared more accurately, and we can be transparent about which countries see comparatively more transaction volume in the DeFi ecosystem.

The 2022 Global Crypto Adoption Index Top 20

Key takeaways from the 2022 Crypto Adoption Index

Overall adoption slows worldwide in bear market, but remains above pre-bull market levels

Our data shows that global adoption has leveled off in the last year after growing consistently since mid-2019. We look at this trend in the chart below, where we apply our index methodology globally by summing all 154 countries’ index scores quarterly, from Q2 2019 to the present, and re-index that number again to show adoption growth over time across the world. 

Global adoption of cryptocurrency reached its current all-time high in Q2 2021. Since then, adoption has moved in waves – it fell in Q3, which saw crypto price declines, rebounded in Q4 when we saw prices rebound to new all-time highs, and has fallen in each of the last two quarters as we’ve entered a bear market. Still, it’s important to note that global adoption remains well above its pre-bull market 2019 levels. 

The data suggests that many of those attracted by rising prices in 2020 and 2021 stuck around, and continue to invest a significant chunk of their assets in digital assets. That also aligns with our previous research showing that cryptocurrency markets have been surprisingly resilient through recent declines. Big, long-term cryptocurrency holders have continued to hold through the bear market, and so while their portfolios have lost value, those losses aren’t locked in yet because they haven’t sold— the on-chain data suggests those holders are optimistic the market will bounce back, which keeps market fundamentals relatively healthy. 

Emerging markets dominate the Global Crypto Adoption Index

One trend we noted last year has only gotten stronger this year: Emerging markets dominate the index. The World Bank categorizes countries into one of four categories based on income levels and overall economic development: high income, upper middle income, lower middle income, and low income. Using that framework, we find that the middle two categories dominate the top of our index. Out of our top 20 ranked countries:

• Ten are lower middle income: Vietnam, Philippines, Ukraine, India, Pakistan, Nigeria, Morocco, Nepal, Kenya, and Indonesia
• Eight are upper middle income: Brazil, Thailand, Russia, China, Turkey, Argentina, Colombia, and Ecuador
• Two are high income: United States and United Kingdom

As we explore later in the report, users in lower middle and upper middle income countries often rely on cryptocurrency to send remittances, preserve their savings in times of fiat currency volatility, and fulfill other financial needs unique to their economies. 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 holds on to top spot, U.S. jumps to fifth, China back in top ten

There are also a few individual countries whose rankings stand out to us. 

For the second consecutive year, Vietnam is ranked first in cryptocurrency adoption. A look at the sub-rankings shows that Vietnam shows extremely high purchasing power and population-adjusted adoption across centralized, DeFi, and P2P cryptocurrency tools. Other sources have also noted Vietnam’s love of cryptocurrency. Polling done in 2020 found that 21% of Vietnamese consumers reported using or owning cryptocurrency, second only to Nigeria at 32%, and the adoption rate has likely only grown since then. Reports from local media suggest that cryptocurrency-based gaming, including games following the play to earn (P2E) and move to earn (M2E) models, are particularly popular in the Southeast Asian country. That goes not just for users, but builders too, as the top-grossing P2E game Axie Infinity is based in Ho Chi Minh City, with its success inspiring more crypto gaming startups to find success in Vietnam.

The United States moved up to fifth in our index rankings from eighth in 2021 and sixth in 2020. The U.S. ranks in the top three of each sub-index, with the exception of population and purchasing power-adjusted P2P exchange usage, where it ranks much lower at 111th. This isn’t surprising, as our research shows that P2P exchange usage tends to be highest in countries with low purchasing power. Perhaps most interesting is the fact that the United States is by far the highest-ranked developed market country on our index, and one of only two to make the top 20 along with the UK. We’ll explore reasons for this later in the full report. 

Finally, China re-entered the top ten of our index this year after placing 13th in 2021. Our sub-indexes show that China is especially strong in usage of centralized services, placing second overall for purchasing power-adjusted transaction volume at both the overall and retail levels. This is especially interesting given the Chinese government’s crackdown on cryptocurrency activity, which includes a ban on all cryptocurrency trading announced in September 2021. Our data suggests that the ban has either been ineffective or loosely enforced. 

Bear markets can’t wipe out bull market adoption

As we noted above, while growth has become more sporadic with the onset of the latest bear market, global adoption remains well above the levels that preceded the 2020 bull market. The data suggests that a critical mass of new users who put capital into cryptocurrency during periods of price growth tend to stay even when prices decline, allowing the ecosystem to consistently grow on net across market cycles. 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. We’ll explore these dynamics more in the full report.

This blog is an excerpt of our upcoming 2022 Geography of Cryptocurrency Report. Sign up here to reserve your copy today!

Read previous editions of our Global Crypto Adoption Index here.

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