Localbitcoins' Growth 85% 2016, Signaling Further Use of Bitcoin

For those interested in tracking the progress of bitcoin as a true form of money, an interesting data point to watch is the global Localbitcoins volume.

There are a variety of different metrics people use to track the adoption of Bitcoin. Some simply track the bitcoin price in terms of US dollars, while others prefer to watch the number of on-blockchain transactions per day increase over time.

According to coin.dance, the weekly Localbitcoins global trading volume increased from just under $10 million to around $18.5 million over the course of 2016 (excluding the holidays).

Also read: Russian Authorities Ban Localbitcoins, Contradicting Previous Statements

Why Localbitcoins Volume Matters

To be clear, it’s always difficult to figure out why people are using bitcoin because the very nature of the digital money does not directly attach real-world identities to the transactions on the network. Having said that, there are some interesting aspects of the Localbitcoins experience that make the weekly volume chart worth watching.

Localbitcoins is basically a place where buyers and sellers of bitcoin can meet to make trades locally or over the Internet. Users are not forced to share their personal information, which means bitcoins can be bought and sold more privately, and the fact that a long, drawn-out signup process is not involved means bitcoins can be purchased without waiting a few days for approval from an exchange.

Due to the relative privacy and and convenience offered by Localbitcoins, prices there tend to be higher than what’s found on Bitfinex or any of the other major bitcoin exchanges. Bitcoin buyers are essentially willing to pay a premium to get fast, relatively-private access to bitcoins.

People who want to use Bitcoin quickly and privately tend to be the people who aren’t having their needs met by the traditional financial system. For example, someone who needs to make a ransomware payment may not be willing to wait a few days before being able to purchase some bitcoin via their bank account because they’ll lose access to their files forever if the payment is not made by a certain time. Additionally, users of darknet markets, such as AlphaBay, can appreciate the added privacy of meeting up with someone in person to exchange cash for bitcoin.

In some situations, Localbitcoins may also be the only option for buying bitcoin, which is usually a sign that the local region’s current financial system is not very accommodating for a variety of other use cases.

Which Countries Saw Growth in 2016?

The growth in global Localbitcoins volume seen in 2016 came from both developed and developing countries. Steady growth was seen in western nations, such as Australia and the United States, and the BRICS countries (Brazil, Russia, India, China, and South Africa). The country that saw the largest growth in Localbitcoins trading volume in 2016 was Venezuela.

In the case of western, developed nations, it is assumed that the Localbitcoins volume accounts for those who are trying to avoid KYC and AML regulations when obtaining their bitcoins. That sort of activity also likely takes place in the BRICS countries, but the state of traditional financial systems in these countries may also play a major role.

Localbitcoins is the highest volume exchange for trading between bitcoins and Russian rubles. This particular trading pair saw its weekly volume triple over the course of 2016.

South Africa was the only BRICS country that saw a decline in Localbitcoins trading volume over the course of 2016, although the volume there is still about as much as India and Brazil combined.

Venezuela saw the largest growth out of any country in 2016, with an increase from 26 to 276 bitcoins traded per week on Localbitcoins. This increase is much more notable when factoring in bitcoin’s US dollar-denominated price rise over the course of the year.

Not the Whole Picture

Of course, Localbitcoins doesn’t tell the whole story when it comes to non-KYC bitcoin trading volume. There are many other alternatives to Localbitcoins, which include everything from the Local Trader feature in the Mycelium bitcoin wallet to something as simple as Facebook groups. Many buyers of bitcoin on Localbitcoins also often move off of the site after completing a few successful trades with their counterparties.

An argument can be made that these sorts of P2P trades are the “real” bitcoin economy, as those who use something like Coinbase do so mostly as a way to speculate on the bitcoin price. If the entry and exit points into Bitcoin continue to see increased regulation and oversight, it could help further develop the bitcoin economy because people will be more likely to stay in bitcoin rather than moving in and out of the digital cash.

What do you think about the role of Localbitcoins in the bitcoin economy? Let us know in the comments below!

Images courtesy of Shutterstock, Blockchain.info