According to the Gemini Global State of Crypto 2022 report, cryptocurrencies reached a “tipping point” last year, “transformed from what many considered a niche investment to a well-established asset class.”

According to the report, 41% of the surveyed global crypto holders bought crypto for the first time in 2021, including more than half of the crypto holders in Brazil (51%), Hong Kong (51%) and India (54%).

The study, based on a survey of 30,000 adults in 20 countries on six continents, also conclusively proved that inflation and currency depreciation are strong drivers for the use of cryptocurrency, especially in emerging markets (EM):

Participants from countries that experienced a 50% or more depreciation of their currency against the US dollar over the past 10 years were 5 times more likely to say they plan to buy cryptocurrency over the next year, compared with participants from countries where less than 50% devaluation.
The Brazilian currency, in real terms, fell 218%, indicating high inflation, against the US dollar between 2011 and 2021, and 45% of Brazilians asked by Gemini said they plan to buy cryptocurrency next year.

South Africa’s currency, the rand, has weakened by 103% in the last decade, second only to Brazil among the 20 countries surveyed, and 32% of South Africans are expected to own cryptocurrencies next year. A similar pattern was observed in the third and fourth largest devaluation or inflation countries, Mexico and India.

In comparison, the currencies of Hong Kong and the United Kingdom have not weakened at all against the US dollar in the last 10 years. At the same time, a relatively small number of respondents in these countries, 5% and 8%, respectively, showed interest in buying cryptocurrency.

What conclusions can be drawn from this? Noah Perlman, COO of Gemini, sees different uses for cryptocurrencies, often depending on where the person lives. He told the Cointelegraph:

In countries where the local currency has been devalued against the dollar, cryptocurrencies are seen as a “must for investment”, while in developed countries it is still largely considered “nice to have”.

Source: Gemini
Cryptocurrency as an alternative to currency
Winston Ma, former CEO and president of the China Investment Corporation of North America and now assistant professor at the New York University School of Law, basically distinguishes between an asset that serves as a hedge against inflation and an asset that serves as a replacement for a currency. .

In his opinion, cryptocurrencies such as bitcoin (BTC) have not yet reached the status of “inflation hedging”, unlike gold. In 2022, they looked more like growth stocks. “Bitcoin is more closely linked to the S&P 500 – and Ethereum to the Nasdaq – than gold, which has traditionally been seen as a hedge against inflation,” he told the Cointelegraph. But things are different in some parts of developing countries:

In emerging markets such as Brazil, India and Mexico struggling with inflation, inflation may be an important factor in the use of cryptocurrencies as an “alternative to currency.”
“There is no doubt that in the first place, and adoption is still driven by countries where currency stability and / or access to proper banking services is an issue,” – Justin Dantan, Director of Institutional Sales at Amber Group – a Singapore-based digital asset firm , reported Cointelegraph. Simply put, he said, developing countries are more interested in alternatives to easily degradable fiat currencies, adding:

“Theoretically, in US dollars, the largest flows may still come from institutions and more developed countries, but the increase in real users is likely to come from places such as Lebanon, Turkey, Venezuela, Indonesia and others.”
Sean Stein-Smith, associate professor of economics and business at Lehman College, told the Cointelegraph that he is not particularly surprised by the survey results, “given that inflation is one of the factors that has driven and continues to drive the adoption of bitcoin and other cryptocurrencies.” Worldwide. “.

According to Stein Smith, this is just one of many factors, and often there are different factors in different regions that drive adoption. At the most basic level, investors and entrepreneurs are increasingly recognizing the benefits of cryptocurrencies as an “immediately available”, traceable and cost-effective transaction option. Elsewhere, “capital gains and income from cryptocurrencies” encourage the use of cryptocurrencies.

There are regulatory issues related to cryptocurrencies around the world, especially in the Asia-Pacific and Latin America regions, where 39% and 37% of respondents, respectively, said that “legal uncertainty surrounding cryptocurrencies”, tax issues and government deficits education can affect acceptance, see report.

Source: CoinTelegraph