Crypto is pushing its way into the mainstream once and for all. That’s according to an annual State of Crypto report published by the venture capital firm Andreessen Horowitz, which highlights the emerging international market for stablecoins, maturing infrastructure, and declining transaction fees.
“There's a bunch of things I think you can take away. Maybe the simplest, high-level, is that crypto activity is at an all-time high, and there's a bunch of different ways to cut that,” Eddy Lazzarin, chief technology officer at Andreessen Horowitz, told Fortune.
The report breaks down crypto activity into three distinct categories: users, owners, and addresses, noting that “one address does not necessarily correspond to one person” because one person can have multiple addresses. It also makes clear that only a portion of crypto owners are active users.
The owner category is used for “people who just own crypto, but don't necessarily use the blockchain like they have it in a centralized exchange,” Lazzarin said. Meanwhile, ”users” are active owners who use the blockchain to do things like purchase NFTs or transfer USDC. The report says 5% to 10% of owners fall into this bucket.
Active monthly addresses hit 220 million, up significantly from 2023 where it sat below 100 million. The report likens this pace of increase to the adoption trajectory that took place during the early days of the internet.
The number of crypto owners worldwide reached a high of 617 million this year, according to the report. While there are hundreds of millions of global crypto owners, the report puts the number of active users at between 30 to 60 million.
Lazzarin believes that the reason for this might be a complicated user experience which involves many steps and advanced knowledge of the technology. But, he views this discrepancy as an opportunity to re-engage this swath of passive crypto owners.
“That tells me we need better apps, we need more creativity, we need lower prices, we need regulatory clarity,” Lazzarin said “For those builders, all those things kind of come together. So, I see it as a big opportunity.”
Stablecoins find “product-market fit”
The report also points to mobile wallet use as an indicator that global crypto activity is at record levels. While use of self-custody platforms like Coinbase Wallet and MetaMask, which are primarily used in the West, has fallen significantly over the last two years, the report says this has been more than offset by people using mobile wallets for stablecoins in places like Nigeria, India, and Argentina.
According to the report, stablecoins have found “product-market fit,” meaning that “a product is something that the market demands,” Lazzarin said. The portion of daily crypto activity driven by stablecoins has grown to 32%, surpassed only by decentralized finance. Despite crypto’s consistent volatility and cyclical behavior, stablecoin activity has continued to grow steadily over the past five years.
Specifically, the demand for stablecoins is high in countries with rampant inflation. For example, in Argentina, people turned to stablecoins to protect their assets as the Argentine peso depreciated 82%. Consequently, Bitso, a crypto exchange founded in Mexico, saw over 10,000% increase in stablecoin trading value, the report showed.
Declining Transaction Fees
The report also attributed record crypto activity to a major drop in on-chain transaction fees. “I think that these things are undoubtedly related,” Lazzarin said.
One example the report points out is how Ethereum scaling has decreased the cost of sending USD internationally by 99%. Whereas international wire transfers typically cost $44, transferring USDC via Coinbase’s Base L2 costs less than one cent.
Lazzarin said that maturing crypto infrastructure, including new blockchains and increased interoperability, has led to this point of increased activity and decreased friction.
“All those things come together to make it cheaper than ever to use a blockchain despite the fact that there's more use. It's not cheap because no one's 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 published the State of Crypto report annually since 2022.
