A BIS report indicates cross-border crypto flows reached $2.6 trillion in 2021, highlighting emerging markets’ roles in reshaping remittances. The study links rising stablecoin and Bitcoin transactions with high traditional remittance costs, while noting cryptocurrencies are becoming alternatives for these payments. Meanwhile, a prominent analyst announces a shift in outlook on Bitcoin’s market dynamics due to increasing institutional liquidity.
A recent study from the Bank for International Settlements (BIS) has unveiled a significant rise in cross-border crypto asset transfers, reporting an astounding $2.6 trillion in 2021. This figure equates to about 12% of global goods trade, with stablecoins comprising nearly half of this activity. The research, conducted by Raphael Auer, Ulf Lewrick, and Jan Paulick, examined transactions across a staggering 184 countries from 2017 until mid-2024.
Interestingly, while the U.S. and U.K. continue to be pivotal in the crypto sphere, the spotlight is shifting towards emerging markets such as India, Indonesia, and Turkey. This shift has been largely accelerated by regulatory crackdowns in China and has led Turkey and Russia to become significant destinations for stablecoin transactions. What’s more, the density of crypto transactions appears to surpass that of traditional banking networks, although the concentration remains lower.
The evolving landscape of crypto flows is also closely linked to global financial conditions. A tightening U.S. monetary policy, coupled with a strong dollar, has been associated with a drop in transaction volumes. However, high inflation and volatile exchange rates prevalent in emerging markets seem to correspond with increased crypto usage. In particular, stablecoins like USDT and USDC appear to be flourishing as preferred transactional tools, while Bitcoin (BTC) continues to attract speculative investors.
The study highlights the potential of crypto assets as alternatives to expensive remittance services. In corridors where conventional fees are steep, transactions involving stablecoins and small Bitcoin amounts have surged by nearly 25%. It’s worth noting that low-value Bitcoin transfers of under $500 are particularly linked to substituting traditional remittances.
The BIS authors remarked on the utilitarian aspects of crypto, stating, “Our analysis points to cryptoassets also being used as a transactional medium.” Higher opportunity costs from fiat currency expenses—stemming from inflation—have incentivised cross-border transactions in both stablecoins and unbacked crypto assets alike.
Moreover, high fees associated with traditional remittances have spurred significantly larger cross-border flows of low-value BTC and stablecoins from advanced economies to emerging markets. Intriguingly, restrictions on capital flows tied to traditional finance appear to have either little or a positively correlated effect on crypto activity, suggesting that the anonymity of these networks may be a tactic to circumvent regulatory obstacles.
As the role of crypto in remittances expands, the BIS authors caution about integrating cryptocurrencies with mainstream financial systems. They indicate that policymakers are faced with the tough challenge of fostering innovation while also managing systemic risks, particularly in less developed economies.
Shifting gears in the Bitcoin arena, recent insights suggest that the market is witnessing a revival, thanks in large part to popping institutional demands and surging inflows through ETFs. Ki Young Ju, the CEO of Cryptoquant, has notably changed his bearish viewpoint, implying that there is a high surge of institutional investment reshaping the Bitcoin landscape.
On social media, he reflects, “Just two months ago, I anticipated the end of the bull cycle, but I was mistaken. Selling pressure in Bitcoin is decreasing, and institutional inflows keep rising thanks to ETFs.” Ju noted that the transformation in the Bitcoin market structure is significant, moving away from traditional cyclical sell-offs driven predominantly by a few large holders.
Previously, whales and miners dictated trends, and their profit-taking cycles indicated market peaks. However, things seem different now. Analysts observe an influx of new participants in the market including ETFs and institutional players, all contributing to a more diversified trading environment. Ju commented that pay attention is now directed toward how much liquidity is flowing from institutional investors rather than the older dynamics of whale sell-offs.
Despite the bright prospects, Ju also warned of lingering uncertainties and sluggish market behaviours as indicators show mixed signals. “We might be in an upward trend considering the price actions, but I wouldn’t label the market as clearly bullish or bearish just yet,” he concluded, reflecting the complex dynamics at play in these crypto markets.
