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Will the smallest crypto-economy like Africa with a growth of 1,200% help Bitcoin increase sharply soon?

Over the past year, Africa has been widely reported as one of the fastest-growing markets for cryptocurrency adoption. However, thanks to the Chainalysis report, it is even more clear that the cryptocurrency market in Africa has increased by more than 1,200% in value received in the past year.

Crypto adoption in Africa surged 1,200% in 2021

Chainalysis estimates that African countries collectively received around $105.6 billion worth of cryptocurrency between July 2020 and June 2021. However, Africa is still the smallest crypto economy of all the regions that the research firm studies.

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Cryptocurrency value received by Africa between July 2020 and June 2021 | Source: Chainalysis

Africa is the undisputed global champ in crypto adoption, with growth exceeding 1200% in the last year, enough for its countries to dethrone part of last year’s Top 10 of most crypto-friendly nations.

According to a review by Chainalysis, the 1200% increase in incoming cryptocurrency volume over the year is almost 50% higher than the global growth average. The rest of the world united registered an also mind-blowing 880% increase in the same period.

“Not only has Africa’s cryptocurrency market grown over 1200% by value received in the last year, but the region also has some of the highest grassroots adoptions in the world, with Kenya, Nigeria, South Africa, and Tanzania all ranking in the top 20 of our Global Crypto Adoption Index”, Chainalysis reported.

Drilling down further, Africa also sees a more significant share of its transaction volume of large retail and small retail-sized payments than the global average.

will-the-smallest-crypto-economy-like-africa-with-a-growth-of-1200-help-bitcoin-increase-sharply-soon

Crypto adoption growth in Africa has been most substantial among retailers and non-institutional traders

Additionally, peer to peer (P2P) trading is extremely popular in Africa – way more than in the rest of the world. Why are P2P platforms so popular in Africa? One reason is that some countries, such as Nigeria and Kenya, have made it difficult for customers to send money to cryptocurrency businesses from their bank accounts, either by passing laws or simply by advising banks not to allow these transfers.

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P2P trading has been instrumental in the explosion of cryptocurrency adoption in the country. According to data shared by Chainalysis, the growth of trading on LocalBitcoins and Paxful has skyrocketed since 2020. However, outside of traditional exchanges, there is a preference for more private and informal mechanisms such as Whatsapp and Telegram groups, so P2P trading volume is much higher in reality than the compiled data shows.

“However, this isn’t an issue for P2P platforms, which are non-custodial and let customers trade cash for cryptocurrency amongst themselves. From there, users can send cryptocurrency to centralized exchanges for more trading options if they so choose”, Chainalysis reported.

P2P platforms have started to steal market share from exchanges like Binance.

“Binance used to be the most popular platform by far, but after the central bank’s sanction, many are moving to P2P platforms, like Paxful and Remitano”, Adedeji Owonibi, CEO and founder of a Nigerian blockchain consultancy company Convexity and the associated 1st cryptocurrency community Hub CBHUB.

Overall, there are four significant crypto trends in Africa, including:

  • Growth in grassroots adoption
  • Increasing popularity of peer-to-peer (P2P) Platforms
  • Crypto-based remittances
  • Crypto as a tool for wealth preservation

Possible cryptocurrency remittance payments have grown consistently since April 2020, save for a recent drop in June.

“Blockchain analysis confirms that cryptocurrency-based remittance payments are likely increasing in Africa. The graph below shows the monthly growth of cryptocurrency payments below $1,000 in both volume and number of transfers, which we consider the upper boundary of estimated remittance payments sent to African countries”, the report stated.

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Given that an unbanked population dominates Africa, the use of P2P platforms has been seen as an easy way to transfer money internally. Almost 96% of crypto transfers in Africa are related to the remittance market. The use of Bitcoin and other cryptocurrencies has offset the high costs associated with international transfers.

Finally, many African users are turning to cryptocurrencies to preserve their savings amid extreme economic conditions. And perhaps this is the driving force behind the crypto market.

With the middle class, many will put their wealth in stablecoins. Richer people who want to make money will use Bitcoin and other cryptocurrencies that are more speculative. As the middle class in Africa continues to grow, it will be interesting to see how crypto use cases continue to diversify for groups at different income levels.

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