A new report on the cryptocurrency market titled, “What does the future hold for crypto exchanges?” revealed that in terms of the size of the cryptocurrency market in Africa, Nigeria has the second largest market, behind South Africa. The report mentions that South Africans primarily use crypto as an alternative investment, while Nigerians primarily use it for savings.
The report was produced by a cryptocurrency exchange, Bitget, in partnership with renowned US management consulting firm, Boston Consulting Group (BCG) and crypto-focused investment firm, Foresight Ventures. The report delves into the competitive landscape of crypto exchanges, unveils substantial development trends in the crypto trading markets, its role in activating the web3 economy, and shares insights on how to navigate the crypto space during a bear market.
The report explains that centralized cryptocurrency exchanges on the African continent account for less than 1% of observed spot and derivatives exchanges globally. He went further to rank South Africa first in the continent due to “the country’s more advanced financial infrastructure and fiat-to-crypto payment rail.”
In terms of Africa’s future potential in the cryptocurrency space, the report states, “We foresee strong growth in crypto adoption in Africa. However, derivatives may be lagging behind given their limited use in traditional markets.
Nairametrics was able to interview Gracy Chen, CEO of Bitget, to get an overview of the African market and its growth potential.
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What needs to be done in Nigeria to improve participation in the cryptocurrency space?
Nigeria has proven to be the second largest crypto market in Africa after South Africa, however, the ratio of Nigeria’s population to crypto adoption is quite high. Crypto penetration in Nigeria is over 40%, higher than traditional banking penetration in the country. In my opinion, education is a key factor in increasing participation, as people will join the crypto space with a better understanding of cryptocurrencies, their value, and their uses. Efforts and investments are therefore needed in crypto education for emerging market countries like Nigeria to improve participation, for example by providing reliable educational resources, learning platforms and communities for related topics. to cryptography.
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In terms of regulation, how does the limited regulatory oversight of the crypto market affect participation on the African continent?
As I mentioned earlier, the adoption rate is quite high in Nigeria, and it is the second largest market in Africa. Currently, regulatory efforts in the marketplace have proven to have little impact on adoption/merchant activity. But we could see P2P trading, for example, becoming very popular in Nigeria, with regulations prohibiting commercial banks from transacting with crypto exchanges and related accounts in early 2021.
The report mentions that Nigerians primarily use crypto as a means of savings. How did the report come to this conclusion?
The report includes different studies in the regions. Foreign exchange market data shows that the performance of the Nigerian currency (naira) has been on a steady decline recently. I think for most Nigerians, keeping money in foreign currencies like US Dollars is a more efficient way to save for future interest than saving in local currency. They could use different cryptocurrencies, the more volatile ones like BTC, ETH, and people can also invest in stablecoins, which are quite stable and tied to USD.
The report mentions that while strong growth in crypto adoption is expected in Africa, derivatives trading may lag given their limited use in traditional markets. What should Africa do to boost participation in derivatives trading?
Let me reiterate the need for mass education for mass adoption. People need education on financial literacy and investing in cryptocurrencies. They could then better understand the benefits and risks of different derivatives trading offerings and find the ones that suit them best. These are effective ways to stimulate derivative participation.
In Bitget, we have launched an innovative trading product called “One-click copy Trade”. It is a pioneering use case in social commerce and has amassed over 55,000 professional traders, with approximately 1.1 million followers. This feature allows new players and seasoned traders to learn and follow different trading strategies and participate and earn their share of the crypto market with just one click. It’s part of our “Better Trading, Better Life” mission for everyone. Traders and copycats benefit from the outcome of their trades and we are currently the largest crypto copy trading platform in the world and one of the top five crypto derivatives exchanges according to Coingecko.
Nuggets of interest from the report
- According to the report, only 0.3% of individual wealth is invested in crypto. For comparison, more than 25% is invested in stocks. This indicates that there is significant room for growth.
- The report mentions that the crypto space is still at the beginning of the adoption curve. By comparing the adoption curve of Web 3.0 versus the Internet in the 1990s, we can observe that crypto is expected to reach 1 billion users by 2030 (if the current growth rate continues).
- Institutional adoption is on the rise (and fast). Hedge funds and venture capital firms doubled their crypto exposure from $35 billion to $70 billion from Q4 2020 to Q4 2021. BCG said it expects “ allocations continue to increase”, with institutional investments “gaining momentum”.
- The report explains that developing countries offer enormous opportunities for growth. They have higher crypto penetration than developed countries because crypto offers unique opportunities among less mature financial infrastructures. The report says these marketplaces could pave the way for everyday web3 use cases.
- Both centralized and decentralized exchanges are expected to see growth. The report explains that the future will consist of “coexistence” between CEX and DEX. CEX currently dominates the derivatives trading industry, while DEX will experience “strong volume growth in the spot segment.”