Global Crypto Investment: Who's Betting Big On Digital Currency?

Cryptocurrency has evolved from an obscure asset to a wildly popular investment option, with a global market capitalisation of $US1.09 trillion as of August 2023. Bitcoin, the first cryptocurrency launched in 2009, remains the largest by market cap and is widely used for transactions and as a store of value. As of February 2024, it constituted 48.6% of the total value of the crypto market. The ease of access and the rise of remittance and peer-to-peer phone payments have contributed to the growing adoption of cryptocurrencies, especially in developing nations. As of 2023, about 17% of American adults owned cryptocurrency, and Nigeria, Vietnam, and the Philippines were among the countries with the highest rates of crypto adoption.

Global market share

The global cryptocurrency market size was valued at USD 4.67 billion in 2022 and is expected to expand at a compound annual growth rate (CAGR) of 12.5% from 2023 to 2030. The market cap was valued at over USD 800 billion in 2022. Cryptocurrency, also known as virtual currency, exists digitally and has no regulatory authority.

The market is expected to grow due to the increasing adoption of distributed ledger technology, rising digital investments in venture capital, and the growing number of businesses that now accept cryptocurrency as an official payment method.

The hardware segment dominated the market in 2022, accounting for more than 82% of the global revenue. The software segment is anticipated to expand at the highest CAGR during the forecast period due to the increasing demand for crypto wallets and crypto exchange software.

The Asia Pacific dominated the cryptocurrency market in 2022, with a share of over 30%. This is attributable to the acceptance of cryptocurrencies in countries such as South Korea, Japan, and India, and the presence of cryptocurrency mining companies in the region.

North America is expected to witness significant growth during the forecast period due to the use of cryptocurrencies in NFTs and the rising acceptance of cryptocurrencies as a form of value storage.

Some of the key vendors in the cryptocurrency market include NVIDIA Corporation, Advanced Micro Devices, Inc., Intel Corporation, Binance, and Xilinx, Inc.

Country with the most crypto owners

While the United States has the most crypto owners in terms of numbers, with roughly 46 million or 13% of its population owning crypto, Thailand has the highest number of crypto holders per capita. A 2021 report found that 20% of Thai residents hold some form of cryptocurrency.

In 2024, consumers from countries in Africa, Asia, and South America were most likely to be owners of cryptocurrencies. For instance, nearly one out of three respondents to a survey in Nigeria mentioned that they either owned or used a digital coin, compared to six out of 100 respondents in the United States.

The United Arab Emirates (UAE) has the highest rate of crypto ownership globally. The country's government is considered to be very crypto-friendly, with the Emirates being generally very open to new technologies and proposing zero taxes for crypto owners and businesses.

Crypto's legitimacy

The legitimacy of cryptocurrencies is a highly debated topic. While some countries have embraced their use, others have banned them outright. In this article, we will explore the arguments for and against the legitimacy of cryptocurrencies and examine the impact of regulations on their perception as a legitimate investment vehicle.

The Case for Legitimacy

Cryptocurrencies have gained significant traction and legitimacy in recent years. The first cryptocurrency, Bitcoin, was launched in 2009, and since then, over 21,000 different cryptocurrencies have emerged. The total value of all cryptocurrencies is estimated to be around $2.02 trillion as of September 2024, with Bitcoin accounting for about $1.14 trillion. The rapid growth of the crypto market, which rose from $1 trillion to $2 trillion in just one year, is a testament to its increasing legitimacy.

Additionally, cryptocurrencies are gaining acceptance as a legal tender. El Salvador became the first country to adopt Bitcoin as legal tender in 2021, and the Central African Republic has followed suit. Local governments in the United States, such as New York City and Miami, are also embracing digital assets. The recognition of cryptocurrencies as a legitimate form of payment by governments is a significant step towards establishing their legitimacy.

Smart contract platforms like Ethereum are driving the world towards a decentralized future, where large sums of money can be transferred without the need for middlemen or their accompanying fees. Beyond currency, crypto offers a wide range of technological applications, including supply chain management, healthcare record-keeping, and real estate tokenization. The versatility and growing adoption of cryptocurrencies make a strong case for their legitimacy.

The Case Against Legitimacy

Despite their increasing popularity, cryptocurrencies face several challenges that question their legitimacy. One of the primary concerns is the regulatory uncertainty surrounding them. Cryptocurrencies are a very nascent asset class, and the lack of clear regulations makes financial advisors and institutions hesitant to adopt them. While some countries are embracing crypto, others have imposed complete bans, including China, Egypt, and Saudi Arabia. The absence of a consistent global regulatory framework creates uncertainty and hinders widespread acceptance.

Another significant concern is the environmental impact of cryptocurrency mining. Bitcoin mining alone consumes an estimated 0.60% of the world's electricity production and creates carbon emissions comparable to those of entire countries. The energy-intensive nature of crypto mining has led to criticism and scrutiny from environmental advocates and regulators.

The Impact of Regulations

The perception of legitimacy in cryptocurrencies is closely tied to the presence of effective regulations. The implementation of anti-money laundering (AML) regulations and know-your-customer (KYC) policies has been crucial in addressing criminal activities and improving investor confidence. International monitoring bodies, such as the Financial Action Task Force (FATF), play a pivotal role in setting standards and best practices for the crypto industry.

While regulations are essential, they must be carefully designed to balance oversight and flexibility. Overly restrictive regulations can hinder innovation and disrupt the efficiency that cryptocurrencies offer. On the other hand, a lack of clear and adaptable regulations can lead to confusion and uncertainty, deterring institutional investors. Striking the right balance between regulation and flexibility is vital for fostering the legitimacy of cryptocurrencies.

In conclusion, the legitimacy of cryptocurrencies is a complex and evolving topic. While they have gained significant traction and acceptance, regulatory uncertainties and environmental concerns remain obstacles to their widespread legitimacy. As the crypto industry matures, the development of effective and adaptable regulatory frameworks will be crucial in shaping the perception and legitimacy of cryptocurrencies as an investment vehicle.

Reasons for investing

While it is difficult to find precise statistics on how much of the world invests in cryptocurrency, it is clear that it is a global phenomenon. According to a 2023 report by Chainalysis, Central and Southern Asia are leading the way in grassroots crypto adoption, with six of the top ten countries on their Global Crypto Adoption Index located in the region. Other countries in the top 20 include Nigeria, Vietnam, and the Philippines.

A 2024 survey by Statista found that consumers from countries in Africa, Asia, and South America were most likely to be owners of cryptocurrencies, with nearly one out of three respondents in Nigeria saying they owned or used a digital coin. In the United States, this figure was six out of 100 respondents.

High Liquidity

Crypto trading is marked by high liquidity, meaning it is easy to buy and sell cryptos. Bitcoin, for instance, is always in high demand. The number of crypto wallets in 2020 increased to more than 54 million, and crypto trading is highly accessible to ambitious investors and big businesses alike.

High Returns

The possibility of making a profit is a major motivator for people who invest in cryptocurrency. Cryptocurrencies are highly volatile, which means that one can potentially achieve high returns from a single trade. However, it is important to remember that volatility also means that traders can lose it all in a second, so it is crucial to consider potential risks and devise an effective risk management strategy.

Independence and Flexibility

Cryptocurrencies do not rely on banks, which often charge exorbitant fees just to hold your money. The crypto market is also open 24/7, so you can choose when and how you want to buy and sell.

Portfolio Diversification

Investing in cryptocurrency is a great way to diversify your portfolio since crypto does not usually move in tandem with other assets such as bonds and stocks. By investing in crypto, you can reduce risks by spreading your investments across different assets.

Unlimited Choice of Coins

While Bitcoin is the most well-known and authoritative crypto, there are thousands of altcoins available to buy and sell. This vast array of options helps investors diversify their portfolios and potentially increase their wealth. Some popular altcoins include Ethereum, Ripple, and Monero.

Bright Future

Despite their high volatility, cryptocurrencies can be a safer and more promising investment alternative compared to other assets. Bitcoin, for example, has survived its ups and downs and continues to thrive during the ongoing pandemic, making investors quite positive about its future. Many believe that investing in Bitcoin during times of financial uncertainty is a safer bet than traditional currencies.

Reasons for avoiding

While it is difficult to pinpoint the exact percentage of the world's population that has invested in cryptocurrencies, we can look at some statistics and surveys to get an idea. According to Statista, the global user base of cryptocurrencies increased by nearly 190% between 2018 and 2020, with consumers in Africa, Asia, and South America being the most likely to own cryptocurrencies in 2022. A survey by Morning Consult in July 2023 found that 26% of millennials in the US owned Bitcoin, compared to 14% of all US adults. Another survey by Pew Research Center in 2023 showed that about 17% of American adults have owned cryptocurrency.

Volatility and Risk:

Cryptocurrencies are highly volatile and prone to significant price fluctuations. This makes them a risky investment, as their value can drop suddenly and lead to substantial losses. The lack of stability makes it challenging to use them as a functional currency for daily transactions.

Difficulty in Evaluation:

Unlike stocks, which are tied to the performance of a company, cryptocurrencies are challenging to evaluate and value. They are not tied to any underlying asset or revenue stream, and their prices are based on speculation and market sentiment. This makes it difficult to make informed investment decisions and predict their future value.

Regulatory and Legal Concerns:

The cryptocurrency market currently has very little regulatory oversight, which can leave investors vulnerable to fraud, lack of transparency, and digital theft. The lack of regulation also means that there is limited recourse if something goes wrong. Additionally, the legal status of cryptocurrencies varies across jurisdictions, and some countries have banned or restricted their use.

Environmental Impact:

The process of mining cryptocurrencies, particularly Bitcoin, consumes a significant amount of energy and contributes to carbon emissions. This has raised concerns about the environmental impact of cryptocurrency mining and led to criticism from environmental advocates.

User Risk and Security:

Cryptocurrency transactions are irreversible. If a user sends cryptocurrency to the wrong address or loses their private keys, there is no way to recover the funds. Additionally, cryptocurrency exchanges and wallets have been hacked in the past, resulting in the loss of millions of dollars worth of coins.

Association with Criminal Activities:

Cryptocurrencies have been associated with criminal activities, such as money laundering, illicit purchases, and ransomware. This has led to increased regulatory scrutiny and negative perceptions of cryptocurrencies.

Frequently asked questions