The cryptocurrency market has made its biggest leap in terms of global adoption, or at least the data says so. The primary way to measure the adoption rate is currently done with the help of data from LocalBitcoins, peer-to-peer exchanges available in over 250 countries.
The platform churns out data accumulated from all these countries separately on a weekly basis, which by market standards were considered a fair measure to check the adoption rate. However, is the data from LocalBitcoins as reliable as it is considered to be?
Well, many analysts have started to look closely into the ways the platform collects its data and categorizes it. The analysis suggested that the data collected by the platform might not be a reliable way of measuring the crypto adoption rates of various countries and regions.
Matt Ahlborg, one of the analysts studying the platform's data output noted that the platform's ways of projecting data on adoption could be misleading. He gave the example of HongKong which as per the LocalBitcoins data has seen a significant surge in Bitcoin use due to the ongoing protest against the Chinese government. However, the locals in the area suggest they haven't noticed any such change in the finances nor they have seen increased discussions about using Bitcoin.
Ahlborg found that the spike in data for Bitcoin usage was the job of a single trader who supposedly made 30 significant transactions to move a hefty amount of Bitcoin using the peer-to-peer exchange.
Iran and Egypt trades differ with the data projection of LocalBitcoins
Further studies seemed to defy similar claims made in terms of Iran and Egypt as well, where the local Bitcoin traders suggested that the data projection of the exchange has no correlation with the reality on the ground.
One of the traders in Egypt said,
“I don’t believe in these statistics as it never reflects the real volume … Egypt is still in the gray area of crypto regulations, and it is not allowed publicly. This is why there’s no clear data or statistics about it.”
LocalBitcoins explain the data projection and mismatch
Veruscka Xavier Filgueira, spokesperson for LocalBitcoins addressed the concerns raised by independent studies and said that the small transactions are still an issue and often find themselves miscategorized, but noted that these smaller transactions do not really make much of a difference in the country's overall demographics.
However, Filgueira did mention that high volume trades along with a long period of activeness by a certain group of traders can lead to variation in volume.
“it is possible that some volume variation is driven by a particularly high volume trade or an exceptionally active period for a group of traders.”
Similarly, there has been a lot of noise about Venezuela being revived by Bitcoin and has been creating new trading volume records every other month. However local Bitcoin traders told that most of the significant volumes responsible for projecting the high rate of adoption come from government officials looking to get richer.
A local entrepreneur who uses the peer-to-peer exchange to run his company explained how government officials are still looking to fill their pockets.
“Mining can only give you a certain amount, but to print bolivares non-stop and then buy bitcoins can give you much more,”
However, Filgueira countered the claim made by the locals by pointing out that the average transactions coming from Venezuela are around $30 which suggested a strong presence of local people in the Bitcoin community.
The entrepreneur agreed with the analogy put forward by Filgueira and said,
“Government officials use gold as a way to funnel money in and out of the country, and lately, they’ve been talking about bitcoin. But I don’t think they’re using LocalBitcoins, that’s more for regular people.”
The spokesperson for the platform agreed that the regional data is still very unreliable and thus the high volume trades made by whales often get registered and traced back but the smaller ones don't.
“LocalBitcoins’ largest volumes in 2014 were concentrated in countries like the UK and in the USA and now we have Venezuela, Russia, and Nigeria in the list of countries with the highest trade volumes, which doesn’t only reflect the change in the profile of our user base but might also indicate a step forward in the usage of BTC as an alternative financial system.”