The consolidation of cryptocurrencies is one of the most disruptive changes that are already part of the transformation of the global economy.
Cryptocurrencies have been on the market for over 10 years and, as with other technological advances, only “a minority” knew of their existence and of the impact they were going to have on society.
However, the momentum over the past 18 months has led to an estimated overall market value of around $1 billion in 2020, with an expected 30% CAGR over the next 6 years.
The penetration of cryptocurrencies worldwide
Already in 2020, cryptocurrencies began to have a significant penetration at a global level, especially in countries where financial and economic uncertainty and instability are high, and where legal insecurity poses a great risk for individuals and companies.
According to Statista’s 2020 Global Consumer Survey, people in Africa, Asia and LatAm lead in the use of cryptocurrencies as a financial product at a global level, reaching over 14% penetration in Nigeria and South Africa; Vietnam, the Philippines or Thailand; Peru, Colombia or Argentina; or Turkey.
This stands in contrast to more developed markets such as the United States, the United Kingdom, Germany, France or Japan, where penetration is under 6.2%.
Furthermore, blockchain technology has led to the existence of more than 1,000 cryptocurrencies globally, although only around 20 of them have regular activity, with Bitcoin and Ethereum concentrating and leading the transactional activity.
What drives the demand for a cryptocurrency
As with all financial products traded on the markets, supply and demand are the main factors that drive the “appetite” for these new intangibles.
If there is something we perceive every day, it is that part of that demand is triggered by news, statements or opinions about cryptocurrencies that appear in the media from influential personalities such as Bill Gates, Elon Musk or Mark Cuban, among many others, generating large movements in the price of a cryptocurrency. But what other factors influence the demand for a cryptocurrency?
Branded searches and the price of Bitcoin
The impact of news from influential personalities in the business world, especially financial and technological, generates an incremental demand on Bitcoin searches, which in turn generates great dynamism in the Bitcoin price.
Narrowing the answer down to a single cryptocurrency, Bitcoin, taking the branded searches in six countries (the US, China, the UK, France, Germany and Japan) as input drivers, and classifying the news from different personalities during the last 12 months, we build time series that allow us to identify behavioral patterns that contribute to the demand.
From this, it follows that Bitcoin searches have a greater contribution to the Bitcoin price in Japan or the UK than in China or the US, the countries with the highest technological development.
View data
| Contribution to price | Cryptocurrency adoption | |
|---|---|---|
| China | 69.9% | 6.9% |
| US | 79.1% | 6.2% |
| France | 80.4% | 5.6% |
| Germany | 83.4% | 5.2% |
| UK | 84.2% | 4.7% |
| Japan | 90.0% | 3.7% |
Therefore, in these markets, news from influential personalities in the business world, in addition to other financial factors, has a greater impact than in European countries or Japan.
Another important factor to take into account is that Bitcoin searches lead the Bitcoin price by one week; in other words, although there are immediate effects due to some specific news, people usually take between three and seven days to react, either buying or selling Bitcoin.
In addition, the contribution of Bitcoin searches to its price has an inverse correlation with the penetration of cryptocurrencies in the markets.
In other words, the more people use cryptocurrencies in a market, the greater the impact of news from influential personalities in the business environment and of other financial factors on its price; something logical from the standpoint of financial and technological development in the most advanced markets at a global level.
Volatility and risk for emerging markets
Therefore, it is important to highlight that the high volatility of the price of cryptocurrencies is due to different factors that cause a sharp demand in a short time; but it is also important to highlight that private interests, which have greater control over financial products in developed markets, may cause such volatility.
And due to the greater penetration of cryptocurrencies in emerging or less developed markets, which have a lower financial culture and less technological deployment, there is a higher risk that a sharp fall in the price of cryptocurrencies could cause a potential financial crisis in these countries, which are undoubtedly much more vulnerable.
Technology opens up new opportunities and allows people and companies to advance in different markets, with different levels of development, in a similar way.
However, it must not be forgotten that the players participate, and that the game is controlled by the ones who carry out the development and set the rules. And they always win.
