The Boston Consulting Group predicts that the number of crypto users will increase to 1 billion by 2030.
In a new report released July 22, 2022, the management consulting firm likens crypto adoption to the growth of the internet in the 1990s. The company predicts North America will lead crypto adoption by 2030, having the most investment per user. The average user in North America holds $18K, or about 0.4% of their wealth, in crypto.
Five years ago, the number of crypto applications increased from 800 to 10,000. Initial Coin Offerings, where a crypto company’s custom governance tokens are sold to raise capital, experienced a boom in 2017 and gave birth to many crypto exchanges dominating trading volume today, the report says.
Crypto still trails traditional assets in portfolio allocation
But investments in traditional assets continue to outstrip crypto investments. BCG estimates that 0.3% of users’ overall wealth is held in crypto, compared to 25% held in equities. Institutional investment in the space has been patchy, with venture capital and hedge fund firms leading adoption. Between the fourth quarter of 2020 and the end of 2021, institutional crypto investment totaled $70 billion. Tesla, Block, and Michael Saylor’s MicroStrategy have been notable corporations investing in crypto. Payments provider MasterCard is looking to make it possible to make purchases in cryptocurrency directly without conversion to fiat money.
Banks are getting in on the act too. JPMorgan Chase bank pioneered a BTC fund and is working on developing blockchain assets. Morgan Stanley started offering wealth-management clients exposure to bitcoin funds in March 2021.
Increasing expansion of crypto exchanges will drive adoption
BCG suggests that increasing the penetration of crypto exchanges is key to the growth of crypto adoption. Being critical drivers of adoption, crypto exchanges have undergone consolidation phases, where they’ve established themselves in countries through the reduced costs brought about by dominant market share. Aggressive Mergers and Acquisitions strategies have seen major offshore exchanges like FTX move onshore in developed countries like Japan, where FTX acquired Liquid, a relatively small player.
Regional penetration and consolidation also came about by companies offering regional products to establish a market in a specific region like the Asia Pacific. Companies like Binance have the potential to supplant local exchanges due to agile product development and robust platforms with the ability to process large trading volumes. A leader in spot and derivatives products, Binance has repeatedly clashed with regulators for offering unregulated derivatives products.
FTX is awaiting approval from the Commodities and Futures Trading Commission to offer disintermediated trades for derivatives products as it seeks to expand its footprint in the U.S.A.