Crypto is entering the mainstream once and for all. That’s according to an annual State of Crypto report published by venture capital firm Andreessen Horowitz, which highlights the emerging international market for stablecoins, maturing infrastructure and reduced transaction fees.
“There’s a bunch of things I think you can take away. Perhaps the simplest, high-level one is that crypto activity is at an all-time high, and there are many different ways to reduce that,” said Eddy Lazzarin, chief technology officer at Andreessen Horowitz. Luck.
The report breaks down encryption activity into three distinct categories: users, owners, and addresses, noting that “one address does not necessarily correspond to one person” because a person can have multiple addresses. It also makes it clear that only a portion of crypto holders are active users.
The holder category is used for “people who just own crypto, but don’t necessarily use the blockchain as they have it on a centralized exchange,” Lazzarin said. Meanwhile, “users” are active owners who use the blockchain to do things like buy NFTs or transfer USDC. The report says five to ten percent of homeowners fall into that bucket.
Active monthly addresses reached 220 million, a significant increase from 2023 where they were below 100 million. The report likens this growth rate to the adoption trajectory that took place during the early days of the Internet.
The number of cryptocurrency holders worldwide reached 617 million this year, according to the report. While there are hundreds of millions of cryptocurrency holders worldwide, the report puts the number of active users at between 30 and 60 million.
Lazzarin believes that the reason for this may be the complex user experience that involves many steps and advanced knowledge of the technology. However, he sees this discrepancy as an opportunity to re-engage this group of passive crypto holders.
“That tells me we need better apps, we need more creativity, we need lower prices, we need regulatory clarity,” Lazzarin said “For these manufacturers, all of these things kind of come together. So, I see it as a great opportunity.”
Stablecoins Find “Product-Market Fit”
The report also points to mobile wallet usage as a sign that global crypto activity is at record levels. While the use of self-custody platforms such as Coinbase Wallet and MetaMask, which are mainly used in the West, has declined significantly over the past two years, the report says this has been more than offset by people using mobile wallets for fixed currencies in places like Nigeria, India and Argentina.
According to the report, stablecoins found “product market fit,” meaning “a product is something the market demands,” Lazzarin said. The share of daily crypto activity driven by stablecoins has grown to 32%, surpassed only by decentralized finance. Despite the constant volatility and cyclical behavior of the cryptocurrency, stablecoin activity has continued to grow steadily over the past five years.
In particular, the demand for stablecoins is high in countries with uncontrolled inflation. For example, in Argentina, people turned to stablecoins to protect their assets as the Argentine peso depreciated by 82%. As a result, Bitso, a crypto exchange founded in Mexico, saw an increase of over 10,000% in the trading value of the stablecoin, according to the report.
Reduction of Transaction Fees
The report also attributed record crypto activity to a significant drop in on-chain transaction fees. “I think these things are definitely related,” Lazzarin said.
One example the report points to is how the scaling of Ethereum reduced the cost of sending USD internationally by 99%. While international wire transfers typically cost $44, transferring USDC through Coinbase’s Base L2 costs less than a cent.
Lazzarin said the maturation of crypto infrastructure, things like new blockchains and increased interoperability, have led to this point of increased activity and reduced friction.
“All these things combine to make using a blockchain cheaper than ever, despite the fact that there is more use. It’s not cheap because no one is there. It’s cheap because we have more supply,” he said.
Andresseen Horowitz has invested billions of dollars in crypto and blockchain startups and has been publishing the State of Crypto report annually since 2022.
