Cryptocurrency Market Size
The global cryptocurrency market was valued at USD 910.3 million in 2021 and is expected to grow to USD 1,902.5 million by 2028, with a compound annual growth rate (CAGR) of 11.1% projected for the forecast period of 2021-2028.
In 2020, the market experienced a notable growth rate of 10.0%, surpassing the average year-on-year growth seen between 2017 and 2019.
This market size encompasses a variety of cryptocurrency mining software, including Kryptex Miner by Kryptex, Cudo Miner by Cudo Ventures, and Nicehash Miner by NICEHASH Ltd., as well as mining hardware like the Antminer S19, WhatsMiner M30S+, and AvalonMiner 1246.
The COVID-19 pandemic had an unprecedented and substantial impact on the global cryptocurrency market, resulting in a surge in demand across regions. Despite initial disruptions, cryptocurrencies benefited from a positive demand shock, driven by increased interest in digital assets as a hedge against economic uncertainties. The steady rise in the market’s CAGR reflects the sustained demand and growth, with the industry expected to stabilize and return to pre-pandemic growth trajectories in the coming years.
The cryptocurrency market’s growth is primarily driven by the expansion of distributed ledger technology and the increasing flow of venture capital into digital investments. Many developing countries have begun adopting digital currencies as a medium for financial transactions, further fueling market expansion. The rising popularity of digital assets such as Bitcoin and Litecoin is anticipated to play a significant role in propelling market growth in the coming years.
Additionally, digital currencies are increasingly integrated with blockchain technology to enable decentralized, efficient, and controlled transactions. Blockchain’s advantages, including decentralization, speed, transparency, security, and reliability, are attracting companies to invest in cryptocurrencies and form partnerships to deliver high-quality, efficient services to users.
For example, in October 2018, the Singapore-based Qtum Chain Foundation partnered with Amazon Web Services (AWS) China to integrate blockchain systems with AWS cloud services. This collaboration allowed AWS users to develop and deploy smart contracts seamlessly using Amazon Machine Images (AMI).
Such initiatives from industry players are expected to significantly drive the growth of the cryptocurrency market.
Covid-19 Impact
The Spread of COVID-19 Had Mixed Impact on Global Market
The global Coronavirus pandemic (COVID-19) has significantly impacted the relationship between Bitcoin and the equity market. For instance, on March 12, 2020, a sharp decline in the U.S. S&P Index led to Bitcoin’s price dropping below USD 4,000. The downturn in the initial coin offering (ICO) market has compelled blockchain companies to seek alternative sources of investment funding. In response to the economic strain caused by the pandemic, major blockchain firms such as Elliptic, Chainalysis, and CipherTrace have taken cost-cutting measures, including workforce reductions and budget cuts. Elliptic, for example, reduced its workforce by 30% in the U.S. and UK, CipherTrace scaled back its advertising and marketing roles, and Chainalysis announced a 10% pay cut for employees.
The economic challenges brought about by COVID-19 have left many token sales without adequate funding, causing delays in production for some projects. According to a 2020 ICOBench study, contributions from late January to early February were significantly lower than those during the same period the previous year. Additionally, the pandemic has forced crypto companies to adopt remote work strategies, delaying partnerships and business developments.
While the long-term effects of COVID-19 on global economies remain uncertain, central banks’ responses to the crisis could create favorable conditions for the cryptocurrency market. If Bitcoin continues to outperform traditional markets, it may generate increased interest in crypto as a viable and sustainable alternative to conventional currencies.
Latest Trends
Growing Adoption of Digital Currencies will have Profound Impact on the Market
The growing popularity of virtual currencies like Bitcoin, Litecoin, Ethereum, and others is expected to drive market growth in the coming years. Consumers in developed countries are increasingly adopting digital currencies due to their convenience and flexibility in transactions. This rising acceptance of virtual currencies as a medium of exchange has encouraged central banks to support digital currency initiatives. Central banks are advancing Central Bank Digital Currency (CBDC) projects, with several developed countries actively exploring this technology. For example, the Bank of Thailand and the Central Bank of Uruguay are incorporating CBDC evaluation tools, while the Eastern Caribbean Central Bank and the People’s Bank of China are promoting digital cash as a transactional medium.
In addition to government initiatives, private companies are also expanding their presence in the digital currency space. For instance, in June 2019, Facebook, Inc. introduced its digital currency, Libra, designed to allow users to purchase goods, send money to others, and convert Libra into cash online or at retail locations. Furthermore, businesses can capitalize on fluctuating digital currency prices to enhance their digital assets and strengthen their financial positions.
Driving Factors
Focus on Mitigating Financial Crisis, and Regional Instability Drives the Virtual Currency’s Demand
Financial disaster is a major issue occurring in traditional banking and the financial sector. Financial uncertainty disturbs the economy by dropping the value of the currency. For instance, India’s ICICI bank had majorly confronted the Lehman brother crisis in 2008, which affected the nation’s economy. With Bitcoins or other cryptocurrencies, there is no major effect of the financial crisis on it as its value is balanced universally. Cryptocurrencies are better options in financial uncertainty for the regions with unstable economical structures, which is becoming a major market driving factor for the market.
Increasing Adoption of Bitcoin to Witness Exponential Demand for Cryptocurrency Market
Bitcoin is one of the most popular and majorly adopted digital cash across the world. The rising visibility, growing interest of investors, and supporting regulations are further augmenting the market’s growth. Maturing bitcoin cash value and the facility to offer rewards for transactions are also upsurging digital cash’s market value. Developing countries like Japan, the U.S., European countries, and many more indicate people’s inclination towards digital currency, which is expected to facilitate the cryptocurrency market growth in upcoming years.
Restraining Factors
Misuse of Virtual Currency and Security Attacks Confines the Adoption of Cryptocurrencies
The unauthorized, decentralized, and unregulated nature of virtual currencies has raised concerns among regulators regarding their misuse by criminals for illicit activities. Virtual currencies have been linked to illegal practices such as tax evasion, money laundering, and terrorist financing. In July 2019, Treasury Secretary Steven Mnuchin highlighted concerns about the potential misuse of Facebook’s patented digital currency, Libra, by money launderers and terrorist financiers.
Additionally, security issues and cyber-attacks on digital currency platforms have resulted in significant financial losses, hindering broader adoption. For example, in February 2020, Denial of Service (DDoS) attacks disrupted operations on digital currency exchange platforms like Okex.com and Bitfinex, underscoring the vulnerabilities within the cryptocurrency ecosystem. These ongoing security challenges and the misuse of digital currencies remain major obstacles to the industry’s growth.
Criminals and terrorists often prefer cash transactions and collateral to avoid financial intermediaries like banks, which are subject to anti-money laundering (AML) compliance and reporting regulations. However, the pseudonymous and decentralized nature of digital currency transactions provides a potential avenue for concealing financial activities from authorities. For instance, Bitcoin was infamously used on the Silk Road, an illegal online drug marketplace. From January 2011 to October 2013, Silk Road facilitated over 100,000 transactions involving illegal products before being shut down by the government, leading to the arrest of its operators.
While the criminal use of virtual currencies raises significant concerns, it does not necessarily imply that blockchain technology is inherently harmful to society. The benefits of blockchain, such as increased efficiency, transparency, and innovation, may outweigh the societal costs associated with criminal activities. Law enforcement agencies are increasingly leveraging their capabilities to curb the misuse of digital currencies and enforce regulations aimed at monitoring criminal behavior. Furthermore, governments have the authority to impose stricter legislative controls on digital currency exchanges to ensure compliance and reduce illicit activities.
Segmentation
Hardware Segment to Capture Largest Market Share
The global cryptocurrency market is segmented into two key components: software and hardware.
The hardware segment is further divided based on platform types, including Graphical Processing Units (GPU), Field Programmable Gate Arrays (FPGA), Application-Specific Integrated Circuits (ASIC), and others. This segment includes hardware used for cryptocurrency mining and exchanges, such as the Bitmain Antminer S9i, Halong Mining DragonMint T1, Pangolin Whatsminer M3X, and Avalon6, among others. Among these, ASIC mining hardware is anticipated to dominate the market due to its superior performance and high hash rate, which makes it highly efficient for mining specific cryptocurrencies.
The software segment is categorized into mining software, exchange software, payment solutions, wallets, and others. Examples of popular cryptocurrency software include BeMine, ECOS, Shamining, and CCG Mining. Exchange software, which features a trading engine to connect offers and execute trades in digital currency derivatives, holds the largest market share. These platforms facilitate seamless buying, selling, and matching between users, and their widespread adoption is a key driver of global market growth.
Additionally, wallets, which can be either hardware or software-based, are a crucial component of the software segment. Software wallets (digital wallets) are particularly favored for their enhanced security features. Depending on how users control private key protection, these wallets are further classified into self-hosted and custodial wallets, with self-hosted wallets providing users full control over their funds. This segmentation reflects the increasing demand for secure and efficient
Adoption of Bitcoin to Account for Maximum Share
The cryptocurrency market is categorized by type, including Bitcoin (BTC), Litecoin, Ether, Ripple, Ether Classic, and others.
Bitcoin remains the most widely adopted digital currency in the market. According to a 2017 report by Deutsche Bank AG, Bitcoin is among the most frequently used cryptocurrencies and is expected to maintain its market dominance in the years ahead. Ether, another prominent digital currency, is widely utilized for accounting, investment, and the development of smart contracts and decentralized applications. Ether is anticipated to grow at a steady pace within the market.
Ripple, on the other hand, is designed to verify debentures. Its network establishes creditor-debtor relationships and provides account balances for users within the system. Meanwhile, Litecoin operates with similar technical principles as Bitcoin but boasts the advantage of being four times faster, positioning it to lead market growth in the coming years.
Other cryptocurrencies, including Dogecoin, Monero, and Dash, also play a significant role in contributing to the market’s overall expansion.
Cryptocurrencies are Expected to be Adopted Majorly for Remittances Resulting in Flourishing CAGR
The cryptocurrency market is segmented by end-use into trading, e-commerce and retail, peer-to-peer payments, and remittance.
The trading segment holds the largest market share, driven by crypto trading solutions such as Pionex, Cryptohopper, Bitsgap, and Coinrule, among others. In the e-commerce and retail sector, businesses are increasingly adopting cryptocurrencies as a payment method. For example, in September 2019, the German division of the Burger King chain began accepting Bitcoin for online orders and deliveries.
Virtual currencies are also gaining traction in digital payments, particularly in cross-border remittances. Financial institutions are increasingly adopting blockchain technology to streamline these processes, which is expected to further propel market growth in the coming years.
Regional Insights
The cryptocurrency market is geographically segmented into five major regions: North America, Europe, Asia Pacific, Middle East & Africa (MEA), and Latin America.
In 2020, the North American cryptocurrency market was valued at USD 273 million and is projected to grow at a CAGR of 10% from 2021 to 2028. North America held the largest global market share, accounting for 33.02% in 2020. This dominance is attributed to the region’s treatment of Bitcoin as a medium of exchange for tax purposes rather than a currency. While not strictly regulated by governments, the widespread acceptance of digital currencies by both consumers and retailers has significantly contributed to market growth. Additionally, the prevalence of Bitcoin mining and the presence of major industry players further solidify North America’s leading position.
In the Asia Pacific, technological advancements and the increasing adoption of virtual currencies in countries like Japan and Taiwan are expected to drive significant market growth. Strategic partnerships and collaborations by key players also contribute to the region’s development. For instance, in January 2020, Z Corporation, Inc. and TaoTao, Inc. partnered with Japan’s financial service agency to expand the cryptocurrency market while ensuring regulatory compliance. During the COVID-19 pandemic, Japan approved a new digital currency exchange, while Malaysia’s Securities Commission authorized digital currency exchange operators to continue operating despite national lockdowns. The pandemic has also opened up new opportunities for growth in certain economies within the region.
Meanwhile, Europe and MEA are also showing increasing interest in adopting cryptocurrencies. Both regions are expected to witness substantial growth during the forecast period, following the Asia Pacific. These developments demonstrate a growing global trend toward cryptocurrency adoption across various regions.
The UAE and Dubai are leading blockchain innovation in the Middle East, with Bahrain and Saudi Arabia also making strides toward the adoption of digital currencies. The UAE is actively implementing open ledger solutions to enhance blockchain applications. In late 2017, the UAE Central Bank announced a partnership with the Saudi Arabian Monetary Authority (SAMA) to develop a digital currency for use by both central institutions and select commercial banks. This initiative aims to enable fast and secure settlements.
Financial services companies in the region stand to benefit significantly from blockchain advancements, particularly in areas such as payments, supply chain management, finance, trading, compliance, and operational monitoring. These developments are paving the way for broader blockchain integration across the region.
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