Local Bitcoins: a Geographical Investigation
“There are two and only two ways that any economy can be organized. One is by freedom and voluntary choice — the way of the market. The other is by force and dictation — the way of the State.”
― Murray N. Rothbard
All Bitcoin usage falls on a privacy spectrum. The fewer people that can attach an identity to a particular usage the more private it can be said to be. For the purposes of geographical analysis on Bitcoin usage, only usage with which an identity can be attached is useful. Total usage is inferred from that with which an identity is attached. The accuracy of these inferences depend on the quality and quantity of the data that is used.
Local Bitcoins is one such source of data that is both historically credible and offers a decent amount of information. It’s a platform that connects Bitcoin buyers and sellers locally. Users have to provide part of their identity as a prerequisite to using the platform. Not least of which is their country of residence. Aggregate data on volume per country and over time has been made public. Total volumes are distributed as follows.
A more meaningful measure would take population into account. Dividing a country's total volume by it’s population gives Local Bitcoins volume per capita. This can also be thought of as a measurement of demand.
Venezuela is a clear outlier that nearly doubles all other countries at $22.40 per capita. New Zealand and the United Kingdom follow with $11.47 and $11.24 per capita respectively. Below is the same chart visualized via a choropleth.
The variability in demand is obviously highly complex and dependent on a wide variety of factors. Given Bitcoin’s inherently political and technical nature, the most influential factors are likely related to the following:
- Availability of sound money
- Amount of economic opportunity
- Level of technical sophistication
One attempt at capturing these interrelated factors comes from the Cato Institute in the form of The Human Freedom Index.
The Human Freedom Index presents the state of human freedom in the world based on a broad measure that encompasses personal, civil, and economic freedom. — Cato Institute
Countries are rated 1–10 on 79 distinct indicators. With the help of the statistical procedure PCA, these countries’ 79 scores could be represented in just 2 numbers. The plot below illustrates how countries compare on these two summary scores. The size of the market corresponds with the Local Bitcoins demand. The relationships between these countries and their summary scores is noteworthy.
Westernized countries are clustered together with demand significantly higher than most other countries. The people of Venezuela are isolated in freedom terms while also displaying the most demand. China’s demand is underwhelming but consistent with its position.
It appears to me that above all else adoption is mostly a matter of having the choice.
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