- The Cryptocurrency market grew by 1200 percent between June 2020 and July 2021.
- The three primary driving factors are remittances, growth of P2P platforms and the need for value preservation.
The African Cryptocurrency market, the third-fastest growing cryptocurrency economy, grew by over 1200 percent in the last one year, according to a new 2021 Cryptocurrency report by blockchain data platform Chainalysis.
The report, titled Geography of Cryptocurrency points out that Africa has one of the highest grassroots cryptocurrency adoption rates in the world.
The continent’s Cryptocurrency economy totaled $105.6 billion between July 2020 and June 2021. While this market cap is the smallest compared to volumes on other continents, Chainalysis explains why Africa’s cryptocurrency adoption trend is currently the most dynamic and exciting.
For instance, Africa’s overall retail transaction volume reached over 7 percent for the same period, which is well above the global average of 5.5 percent. The data shows that Africa led other regions in transaction volumes made up of professional, large retail and small retail-sized payments.
Smaller transfer sizes suggest higher grassroots adoption amongst everyday users.
Consequently, five African countries, including Kenya, Nigeria, South Africa and Tanzania, rank highly on the firm’s Global Crypto Adoption Index.
Why P2P platforms are popular in Africa
One of the leading factors driving cryptocurrency adoption has been the continuous growth of P2P exchanges, particularly two of the world’s largest decentralized exchanges, LocalBitcoins and Paxful. According to Paxful co-founder Artur Schaback, there has been 57 percent growth in Nigeria and 300 percent in Kenya.
No region uses P2P platforms at a higher rate than African cryptocurrency users, as they account for 1.2 percent of all African transaction volume and 2.6 percent of all volume for Bitcoin specifically.
The African cryptocurrency community relies more on peer-to-peer exchanges not only to gain exposure to cryptocurrencies but for remittances and commercial transactions, cross-region cryptocurrency transfers constitute the largest part of the African market and are 18 percent higher than the global average.
Cross-region transfers make up a bigger share of Africa’s cryptocurrency market than any other region to 96 percent of all transaction volume, versus 78 percent for all regions combined.
According to the report, the non-custodial nature of P2P exchanges has made it easier for users to trade cash for cryptocurrency. This is especially true for traders in countries like Kenya and Nigeria where central banks have shown hostility towards cryptocurrencies like Bitcoin.
The report adds that the featured transaction volumes figures could possibly be higher since most of the communication involving cryptocurrency transfers happens on unmonitored platforms like Telegram and WhatsApp.
Cryptocurrencies for Remittances and Savings
Moreover, cryptocurrencies are popular for their ease of use in remittances within and outside the continent. They help people to bypass centralized control imposed by governments such as limits on money transfers abroad.
Other Africans, especially international businessmen also use cryptocurrencies for international commercial funds transfers. It is also faster, cheaper, more convenient and private to send or receive money from abroad using cryptocurrencies.
Harsh economic conditions as a result of currency devaluation in many African countries are another reason that turns people to cryptocurrencies for wealth preservation. For instance in Nigeria, Paxful observed that the trading volume on its platform increased when the value of the Naira falls.