Report: DeFi adoption turned Europe into the biggest crypto economy

By: Jinia Shawdagor
Jinia Shawdagor
Jinia is a cryptocurrency and blockchain enthusiast based in Sweden. She loves everything positive, travelling, and extracting joy and… read more.
on Sep 28, 2021
  • Large institutions accounted for over 50% of the volume between July 2020 and June 2021.
  • These institutions invested over 60% of their money in decentralized finance (DeFi) protocols.
  • Per Chainalysis, institutions invested in DeFi because the sector generates revenue without selling holdings.

The region encompassing Central, Northern, and Western Europe (CNWE) has recorded the highest volume of digital currency trading, becoming the most active crypto block. Blockchain analytics company Chainalysis disclosed this news earlier today through a report, noting that CNWE received over $1 trillion (£0.74 trillion) worth of cryptos over the past year. Reportedly, this figure means that the region accounted for 25% of the global crypto activity between July 2020 and June 2021.

According to the report, CNWE achieved this feat after become the second-largest crypto economy in the previous year. Eastern Asia took the crown at the time, but a steady decline due to regulators, especially in China, clamping down on the nascent sector saw the region lose the top spot to CNWE. Per Chainalysis, the crypto activity in Eastern Asia took a sharp plunge in July 2020, making the block the third-largest crypto economy in the world after North America.

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Chainalysis further disclosed that CNWE’s transaction volume rose sharply across most digital assets and related services. Apart from crypto adoption, CNWE positioned itself as an international hub in the global crypto economy. The region sent at least 25% of the crypto that other regions received. For instance, 34% of the crypto that North America received in the 12 months came from CNWE.

DeFi accounted for most of this growth

There was also an influx of institutional investors, which is made evident by transactions exceeding $10 million (£7,387,150.00). Per Chainalysis, institutional crypto transactions grew from $1.4 billion in July 2020 to $46.3 billion in June 2021. The institutional investor activity alone contributed to over 50% of CNWE’s crypto activity.

The company further disclosed that most of these funds went to DeFi protocols. This is evident in the large inflow of funds in Ethereum (ETH/USD) and wrapped Ethereum (wETH/USD), which are commonly used coins in DeFi. Per Chainalysis data, large institutions invested over 60% of their funds in ETH and wETH. In comparison, investments in Bitcoin (BTC/USD), altcoins, and stablecoins were all below 20%, with altcoins getting the smallest percentage.

DeFi protocols also represent three to four out of the top-five services over the 12 months. Protocols such as UniSwap, Instadapp, and dYdX appear frequently in Chainalysis’ chart of the top-five services that received crypto from CNWE. The most popular centralized exchanges are Coinbase and Binance, according to the chart.

Explaining why institutional investors are increasingly turning to DeFi, the report pointed to staking. Through staking, institutions can lend their crypto to DeFi protocols, offering them liquidity. The protocols then lend the money to borrowers, allowing stakers to earn interest. This feature lets stakers generate cash without selling their crypto.

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