Chainalysis data names Europe as the biggest crypto market

The report detailed that the European region recorded crypto transactions worth north of $1 trillion over the past 12 months

A Chainalysis report released on Tuesday revealed that Europe has the largest crypto market. The report, based on data collected between July 2020 and June 2021, described the Central, Northern and Western regions of Europe as ones whose growth spurt has mainly been driven by increased ventures from institutional investors in the space, giving it its current 25% global market share. Figures show that in July 2020, there was only $1.4 billion of institutional investment, which rose to a significant $43.6 billion in June this year.

"An influx of institutional investment, signalled by large transactions, drove most of the growth, though retail activity also increased. Perhaps most interesting is CNWE's unique status as an international hub in the world cryptocurrency economy," the blog read.

The UK has led the regional growth with $170 billion worth of crypto transactions, of which about half of the value (49%) was obtained from decentralised finance (DeFi) protocols. France and Germany completed the top three list as the Netherlands and Switzerland wrapped up the top five rankings, in that order. For nearly all countries in the region, DeFi's share of the crypto activity seen was fairly level.

Chainalysis elaborated that DeFi was one of the categories that have contributed significantly to the crypto boom, as DeFi platforms dominated the huge institutional-sized transfers.

"DeFi protocols represent three to four of the top five services in most months, with Uniswap, Instadapp, and dYdX making frequent appearances. Binance and Coinbase, meanwhile, remain the most popular centralized exchange."

Furthermore, institutional investors who have previously structured their portfolios around cryptocurrency are now shifting into DeFi as it allows staking, through which these investors give their crypto to DeFi protocols, which then lend it out. The lent funds gain interest, which is channelled back to the investor, and thus, income is generated without necessarily having to sell crypto. Staking also has the advantage of lower fees in comparison with traditional transactions.

“Staking with DeFi protocols can be thought of as analogous to a money market in conventional finance, but with lower fees due to the lessened need for human intermediaries given that the protocols run autonomously,” Chainalysis explained.

The CNWE region was also highlighted as the biggest counterparty to all other regions — an important contributor to crypto liquidity. The region's biggest partner in transactions was North America. The other regions it associates with are Eastern Europe, Eastern Asia, and Central and Southern Asia.