Bitcoin Adoption: Trading Volume by Country

Bitcoin exploded onto the global stage in 2017. News outlets, serious investors, the tech community and even taxi drivers were talking about Bitcoin with excitement. Seven months of sliding Bitcoin valuations have done a lot to dampen the enthusiasm seen in late 2017 and early 2018.

Despite falling valuations, those working in the cryptocurrency space have had their noses to the grindstone. Not many people are talking about how the Bitcoin lightning network is slowly being rolled out and since July 2018 has even been trialed by 100 lucky merchants.

The Bitcoin Lightning Network Could Be A Game Changer

Bitcoin lightening network graphic

So, why is the lightning network a big deal? Well, the massive inflow of newcomers to Bitcoin in late 2017 put the network under strain. This resulted in very high fees to send transactions and long transaction times. In a nutshell, the Lightning Network solves these problems and results in Bitcoin transactions being cheap and quick. This new innovation significantly increases the capacity of the Bitcoin network. To put it simply, the Bitcoin network without the Lightning network can process 7 transactions per second. With the Lightning Network enabled, this goes up to around 60,000 transactions per second (TPS). To put all this into context, the popular payment processor Visa can process 24,000 TPS.

So, the complete deployment of the Lightning Network will actually give Bitcoin greater capacity than Visa. This is a massive deal and is essential for Bitcoin to be globally adopted. With the Lightning Network, Twitter CEO Jack Dorsey may not be so crazy when he said “The world ultimately will have a single currency, the internet will have a single currency. I personally believe that it will be bitcoin”.

 


Can Bitcoin Become The World’s Single Currency: Is There Any Data To Look At?

Alright, so the future of Bitcoin looks promising from a technical standpoint, but is Bitcoin adoption actually as global as some media outlets would have us believe? The truth is that most cryptocurrency trading is done on crypto exchanges or in the over the counter (OTC) market. For those who don’t know, OTC markets match buyers and sellers of Bitcoin off public exchanges. This means that someone can buy tens of millions of dollars of Bitcoin without moving the price. The problem with these ways of buying Bitcoin is that there is no public data on how much Bitcoin is being bought and sold in each country.

However, Bitcoin country data is available for LocalBitcoins. In a nutshell, this site enables people in different countries to exchange their local currency for Bitcoin. This can be done either online or in person. It must be noted that the $6.3 billion traded on LocalBitcoins is a fraction of the global trade volume. However, there is more than enough data to get a reasonably accurate idea of the levels of Bitcoin adoption in specific countries.


Bitcoin Trading Volume by Country – Chart

After analysis of the 46 country datasets for LocalBitcoins, it appears that Bitcoin trading on the platform is extremely concentrated. 72% of all Bitcoin trading happened in the top 5 countries: USA, Russia, UK, Venezuela, and China. The top ten accounted for over 86.5% of all trades done on the platform. This seems to indicate uneven Bitcoin adoption rates across the globe.

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Yes, the USA tops country GDP tables and that is no great surprise. Russia, on the other hand, punches above it’s Bitcoinweight given that it doesn’t even break into the top 10 for countries with the largest GDP.

What exceptionally interesting is that all of the countries making up the top 4 in the all-time country volume leaderboard have some kind of problem with their native currencies.


The USA

The first thing to note is that over the last 104 years, the USD has lost more than 96% of its value. Put very simply, cash is a terrible investment. The era of funny money being created out of thin air has only made things worse. This massive increase in the money supply has obviously resulted in the further erosion of the dollar’s purchasing power. Indeed, the recent monetary policies of the US, UK, Europe, and Japan, can be seen as one of the greatest confidence tricks in history that robs ordinary people of their savings.

Decrease in purchasing power of the USD 1913 to 2017 graph

The main point is that the era of quantitative easing funneled billions or trillions of dollars into markets like the stock market and real estate. Massive bubbles have been formed in traditional markets. With the FED beginning to raise interest rates, the stage is set for a correction in these traditional markets.

The US has been lucky that the dollar is the global currency and this has enabled them to export inflation throughout the world. However, Donald Trump and his protectionist trade policies will likely create further inflation in the US.

When everything is considered, it is not surprising that an ever increasing number of US citizens do not trust their government to preserve the purchasing power of their dollars. Both the stock market and real estate look severely overvalued. In this sort of environment, it fundamentally makes sense for investors to look at hedges like gold and Bitcoin for wealth preservation.


Russia

Four russian flags

It’s been widely reported that oil-dependent Russia has been struggling economically for some time now. In May 2018, the Ruble had officially lost 9% of its value against the dollar. It goes without saying that a 9% depreciation in the purchasing power of imported goods, is not good news for the Russian people.

Russia is ranked 12th on the list of countries with the highest GDP. But according to the LocalBitcoins trading data, it ranks second in terms of Bitcoin trading by country. Maybe the reason why is that Russians are beginning to question how much further the Ruble can depreciate. It appears that Russians are increasingly turning to Bitcoin to hedge against the devaluation of the Ruble.


The United Kingdom

Brexit: man steps on both sides of EU and UK flag

Right now, the big political hot potato in the UK is Brexit. What makes this even worse is that the UK government appear to be no closer to negotiating trade deals with the rest of the world. The financial sector directly contributes to 12% of the UK’s entire GDP and is mainly focused in London. That stat doesn’t even account for the value generated by the trickle-down industries who provide goods/services to employees in the financial sector.

The problem is that £26 trillion worth of EU derivatives contracts expire after Brexit. Unless an agreement is made, these contracts are all at risk. It’s been estimated that £70 trillion worth of trades could be impacted after the UK leaves the EU in March 2019. UK insurance companies could also lose access to the £55bn insurance market. As of now, no progress has been made to secure the UK’s access to EU markets after Brexit.

The truth is that these markets are just too big for companies to give up. Indeed, Brexit could see a mass exodus of companies from the UK after the nation departs the EU. This, in turn, will likely lead to a huge brain drain as citizens move abroad for job opportunities.

The future for the UK and its currency looks uncertain. With this drama unfolding in the background, it is maybe not surprising that more and more UK residents are turning to Bitcoin to preserve their post-Brexit wealth.


Venezuela

Venezuela Financial Crisis: before and after

Venezuela Financial Crisis: Before Vs Now

The above three countries at the top of the Bitcoin trading list are not experiencing severe economic crisis just yet. However, Venezuela is heading towards one million percent inflation and economic Armageddon. Shops are empty, wheelbarrows full of money are being used to buy normal items and people are dying of starvation.

A price of a cup of coffee has now reached over 2 million Bolivars. For those fortunate to have a job, that is more than most people earn in a month.

Bloomberg Cafe Con Leche Index Graph

The truth is that cash in Venezuela is being increasingly replaced by bartering systems and Bitcoin. Yes, Bitcoin seems pretty volatile, however, that volatility pales in comparison to a country experiencing hyperinflation. Capital restrictions imposed by the government mean that citizens cannot even withdraw more than $1 a day in cash.

In this environment, it is no wonder that Bitcoin use is on the rise. Cryptocurrencies are maybe the best way for everyday people to get around oppressive government controls and preserve what little wealth they have.

Venezuela is perhaps the best example in the world today that shows that Bitcoin can be used to hedge against government incompetence.


Final Word

According to the LocalBitcoin data, Bitcoin adoption is heavily concentrated in the five top countries by trading volume. All of these countries, except Venezuela, rank highly on country GDP leaderboards. However, it is interesting that each of these nations has varying degrees of uncertainty surrounding their own native currency.

Venezuela is experiencing hyperinflation and one of the worst cases of government failure in the world. Since 2008, many commentators argue that financial institutions such as the World Bank, European Central Bank, FED and the Bank of Japan, have done little to solve the underlying problems that caused the 2008 financial crisis.

Hopefully, we’ll avoid another global financial crisis. However, the warning signs are there for all to see. What Venezuela shows is that in times of economic uncertainty, people are increasingly turning to Bitcoin.

The data shows that 72% of Bitcoin trading happens in just five different countries. This just goes to show what a long way Bitcoin has to go before it can be deemed a truly global currency.

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