Blockchain-based cryptocurrencies, for example, are showing the way forward in the midst of an economic slowdown and rising inflation. According to a report by Boston Consulting Group (BCG), Bitget, and Foresight Ventures, ‘What Does the Future Hold for Crypto Exchanges? ’
Institutions and individuals are adopting cryptocurrencies in increasing numbers. Despite this, the adoption of cryptocurrencies has remained low in comparison with traditional asset classes such as equities, payment technologies, and institutional allocations to private equity.
In contrast, 25% of individual wealth is held in equities, compared with 0.3% in crypto assets. There is a significant difference between geographies in terms of retail cryptocurrency holders or individual crypto holders. Crypto holders in North America own an average of $18,000, or just 0.4% of all wealth, whereas African crypto holders own an average of $190, or just 0.4% of all wealth.
By 2030, it is likely that crypto users will number 1 billion, assuming the trend of crypto adoption continues. Crypto’s popularity is growing among institutional investors as well as individual investors. Institutional investors are most likely to invest in cryptocurrency through hedge funds and venture capital firms. Over the period from the fourth quarter of 2020 to the second quarter of 2021, these players’ exposure to crypto almost doubled to $70 billion.
Crypto markets becoming mature after institutional participation
According to the report, global trading volumes have grown substantially over the past two years, averaging $3.2 trillion in spot trading and $6.3 trillion in crypto derivatives over the two years ending in 2022.
Over two-thirds of open interest in the top 100 derivatives is represented by Bitcoin (BTC) and Ethereum (ETH), which have historically been dominated by perpetual swaps.
Emerging markets leading in crypto adoption
Crypto penetration is already higher in emerging countries than in developed countries, even though the average individual investment is lower. The crypto industry offers unique opportunities to provide traditional financial services to emerging markets with less-developed financial infrastructure.
Four use cases in emerging markets
The four most popular uses of cryptocurrencies in these emerging markets are crypto-backed wealth management, cross-border crypto remittance, crypto-backed payment gateways, and coin-to-coin trading.
Global crypto growth
Due to strong crypto trading growth fuelled by crypto adoption, high future crypto trading potential compared to traditional finances, and opportunities for crypto exchanges to expand their services beyond trading to tackle everyday needs, emerging markets and advanced economies are particularly attractive for global exchange players.
A third of global spot trading volume and approximately 40% of global derivatives trading volume were generated by emerging markets and advanced APAC countries in 2021.
Global CEX trading touch $54 trillion in 2021
Global crypto trading volume is increasing due to crypto adoption and macro trends. Trading volumes for centralized crypto in 2021 topped $54 trillion, while spot trading volumes reached $20.6 trillion, a 2000 percent increase over 2016. Crypto market capitalization and volatility are strongly correlated with spot trading volume. On crypto-native trading platforms, perpetual swaps accounted for about 33 trillion dollars of annual trading volume in derivatives.
The non-fungible token (NFT) market is predicted to reach $231 billion in value by ten years according to Verified Market Research, a market consultancy firm. Music, movies, and sports are the major contributors to the growth of the NFT market, which is expected to grow at a CAGR of 33.7%.
It is estimated that the Metaverse could generate $5 trillion in value by 2030 according to another McKinsey & Company report. Assuming these estimates are accurate, e-commerce is expected to generate $2.6 trillion in sales by 2030, which will fuel cash flow in the Metaverse.