Different use cases for crypto around the world spur divergent crypto markets

Illustration of pixelated coins arranged in the shape of Latin America.

Image: Megan Robinson/Axios

Differing economic conditions around the world result in the existence of two opposing crypto markets – one resembling the original vision that was designed over a decade ago, and the other driven by a more recent development.

Driving the news: Dollars and other currency-linked stablecoins perform well in countries where the value of the local currency fluctuates from one day to the next. But the US and Canada’s “disproportionate adoption of DeFi” has resulted in a very different cryptocurrency market, according to a new report from research firm Chainalysis.

Using the numbers: According to Chainalysis’ 2o22 Geography of Cryptocurrency report, released Thursday, crypto transactions in the Latin America region reached $562 billion in June 2022, a 40% increase from the year-earlier total. (Here are last year’s.)

  • People across the region seem to be turning to crypto to save, send payments or seek alpha, the report said.
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The other side: Where storing value and sending payments dominate activity, crypto markets could perform differently than, for example, areas where decentralized finance is being embraced.

  • The US and Canada’s focus on DeFi has caused their market to behave differently than the rest of the world over the past year, Chainalysis noted.
  • That said, the swings were wilder.

details: Record-high inflation in Latin America’s pockets and unstable local currency means people in the region are using stablecoins for purchases or as a store of value, rather than having cash under mattresses and the like, for example, the Chainalysis report states.

There are country-specific trends to consider:

mexico largest exchange, Bitso, shows how big crypto payments can be.

  • Bitso processed more than $1 billion in remittances from the United States to Mexico in June 2022, representing 400% year-on-year growth and about 4% of the Mexico remittance market, according to the Chainalysis report.
  • Notable: The US’s largest centralized exchange, Coinbase, which launched a payments pilot program aimed at international growth ahead of the announcement of layoffs and spending cuts.
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Brazil is a rare place in Latin America where crypto is used primarily for speculative trading, Chainalysis said, citing Thomaz Fortes, the head of crypto at Nubank, one of the world’s largest digital banking platforms.

  • “Customers want a way to increase their revenue,” Fortes said.
  • Notable: Nubank said this week that it is planning its own token; Warren Buffett’s Berkshire Hathaway is among his supporters.

Argentina has embraced stablecoins, where USDT, USDC and USDD are popular in Buenos Aires simply because they are dollar-pegged, digital and have no buy limits.

  • According to Chainalysis, more than 31% of small retail crypto transaction volume in Argentina comes from stablecoin sales, compared to just 26% in Brazil and 18% in Mexico.
  • Notable: People there are getting paid in crypto, with a blockchain community developing there.
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Be smart: Anecdotes from El Salvador make Nayib Bukele’s big experiment with Bitcoin look like a dud, but crypto adoption is catching on elsewhere.

The final result: “Users in countries with weaker economies tend to rely on cryptocurrencies for remittances and to maintain savings when inflation is high, while users in more developed markets such as Brazil tend to treat cryptocurrencies as a speculative investment,” the statement reads Chainalysis report.

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