The puzzle over the unexpected survival of Bitcoins and exponential rise even in the midst of a global economic recession occasioned by the Covid-19 pandemic seem to be coming together as analysts identify reasons behind the excellent showing of Bitcoin in a year that could easily be termed devastating as economies of countries took a dive for the worst while unprecedented job losses were recorded across the world. According to them, the reasons why the crypto economy ended the year on a high note are varied but all points to the future that is knocking on the door. The most prominent of the reasons are:
Emerging markets fueled growth
The emerging countries are still driving growth despite the pandemic, which is especially notable with increasing crypto-transactions in the region. Bitcoin’s popularity across the emerging markets continues to grow rapidly, as people struck by the Covid-19 crisis are looking for a safe-haven asset they can trust.
What’s driving the appetite for Bitcoin in emerging markets? That’s simple: Easier, faster, more affordable financial transactions – which translate into greater access to global markets. And, with remittances being a massive part of the crypto use cases in the emerging world, Bitcoin remittances have all the potential to replace costly traditional money transfer operators, posing stiff competition to giants like Western Union.
Leading global peer-to-peer crypto trading marketplace, Paxful, for instance, witnessed the rise of emerging markets first-hand. Globally, transactions on the Paxful platform increased by almost 31% in 2020, compared to last year, while India and the African continent show exceptional growth.
“Nigeria, Ghana, Kenya, and South Africa are our main markets in Africa. There’s no question that emerging markets are the future of the crypto economy. That’s been clear to us for some time, as we see on a daily basis how tech-savvy Africans are using Bitcoin to invest, trade, send money abroad and accumulate wealth. Bitcoin helps improve lives and gives opportunities for personal and entrepreneurial development,” says Paxful CEO and co-founder Ray Youssef.
In South Africa and Ghana, the volumes on Paxful platform increased by over 100% compared to 2019, while Kenya demonstrated the most remarkable growth of nearly 390% in 2020. With indications that in regions like South Africa governments intend to provide greater guidance for crypto-industry operators in 2021, the company expects increased appetite for crypto in the next few years, as it becomes embraced by the public and institutions alike.
The rise of Stablecoins
While Bitcoin remains the king of cryptocurrency, this year also saw explosive growth of stablecoins, which are a type of cryptocurrency pegged to fiat currencies like USD, for example. Stablecoins are designed to minimize the volatility of the coin and give an option to convert a highly volatile Bitcoin to a more stable digital asset.
In 2020, the total value of stablecoins exceeded $20 billion – nearly a 300% year-on-year increase. Many experts believe that consumers are flocking to stablecoins for its stability, as it gives them an opportunity to protect their assets during crypto-market turbulence.
Meeting the demand for stablecoins, Paxful introduced Tether (USDT) to assist customers in expanding their portfolios. USDT has been very well received by users, especially in developing countries that often struggle with high inflation. Among African-based Paxful users alone, a 431% increase in trade volume has been recorded since the introduction of Tether. The addition of USDT came alongside the hedging option – or the ability to convert the Bitcoin to Tether, to lock in the price if there are price drops expected ahead. Once Bitcoin stabilizes, users can convert their Tether back to Bitcoin thus preserving it at the desired price. Stablecoins are an excellent tool in combating volatile currencies.
Bitcoin as humanitarian aid
NGOs and charities also played a part in the boosting of the crypto industry, by accepting Bitcoin to support humanitarian causes. In Nigeria, for example, during the protests against police brutality #EndSARS, crypto donations became a preferred mode of providing financial support to the communities involved. In October 2020, one Nigerian advocacy organization is said to have collected around 40% of the $387,000 in donations it raised to assist the protestors. Similar developments have been observed in Venezuela, Chile, and even Zimbabwe.
For its part, Paxful launched #BuiltWithBitcoin charitable initiative in 2017, with the goal to build 100 schools, water wells, and community gardens for sustainable agriculture funded entirely by Bitcoin all across emerging markets. Paxful also recently launched the Africa Fund to assist communities fight the impact of COVID19 and provided thousands with food, personal protection equipment and more. With this project, Paxful aims to show the world the true philanthropic capabilities of Bitcoin, as they strive to change live one Bitcoin at a time.