According to the report, the European region recorded cryptocurrency transactions worth more than $1 trillion over the past 12 months
A Chainalysis report published Tuesday shows that Europe hosts the largest crypto market. The report, based on data collected between July 2020 and June 2021, identifies Central, Northern and Western Europe (CNWE) as the regions that experienced the strongest growth—driven largely by increased institutional activity—giving CNWE a current global market share of 25%. The figures show institutional investment rising from only $1.4 billion in July 2020 to a remarkable $43.6 billion in June of this year.
“The influx of institutional capital, reflected in large transactions, accounted for the majority of growth, but retail activity also increased. Perhaps most notable is CNWE’s unique status as an international hub for the global cryptocurrency economy,” the blog states.
The United Kingdom led regional growth with $170 billion in crypto transactions, roughly half of which (49%) came from decentralized finance (DeFi) protocols. France and Germany round out the top three, while the Netherlands and Switzerland complete the top five in that order. Across nearly all countries in the region, DeFi’s share of observed crypto activity was broadly similar.
Chainalysis notes that DeFi was one of the categories that significantly contributed to the crypto boom, with DeFi platforms dominating large institutional transfers.
“DeFi protocols account for three to four of the top five services in most months, with Uniswap, Instadapp and dYdX appearing frequently. Binance and Coinbase remain the most popular centralized exchanges,” the report adds.
Institutional investors that previously structured portfolios around spot crypto are increasingly entering DeFi, attracted by staking and lending opportunities. In staking or lending arrangements, investors lock or supply crypto to DeFi protocols, which then lend those funds. The interest earned on loans is returned to the investor, generating yield without requiring sale of the underlying assets. Staking also tends to have lower fees compared with traditional financial transactions.
“Staking with DeFi protocols can be thought of as analogous to a money market in conventional finance, but with lower fees because the protocols operate autonomously and require fewer human intermediaries,” Chainalysis explained.
The CNWE region was also highlighted as the largest counterparty to other regions—a critical component of crypto liquidity. CNWE’s biggest transaction partner was North America. Other connected regions include Eastern Europe, East Asia, and Central and South Asia.