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The latest industry research done for Brazil has been published in “The Profile of the Crypto Investor in Brazil” – or “O Perfil do Investidor de Criptomoedas no Brasil,” in Portuguese – and reveals a fascinating trend. Data Reveals that Brazil’s working-class embraces crypto and has become one of the most popular values to trade with currently.
Profile of Average Brazilian Cryptocurrency Investor
The report reveals that Bitcoin (BTC), perhaps unsurprisingly, holds a dominant position in the market, with 86% of those surveyed stating they hold this premier cryptocurrency. Other digital assets present include Ethereum (47%), Litecoin (30%), IOTA (21%) and Ripple (21%). According to the survey, the average Brazilian market participant has two or three cryptocurrencies in his wallet—and I say “his” deliberately; the vast majority of cryptocurrency supporters in Brazil are men (92%), with women only representing a mere 8% of the total market. Regardless of gender, however, most investors in Brazil’s cryptocurrency market are between 20 and 25 years old, with age groups 26-30 and 31-40 each respectively representing about 20%, and the average age overall being 28.
Perhaps the most remarkable data uncovered by this survey is that the vast majority of cryptocurrency holders (40%) in Brazil earn below the countries minimum wage of BRL 2,500.00 (USD 600), with 29.5% earning between BRL 2,500.00 (USD 600), and BRL 5,000.00 (USD 1,200). Even more surprising, only a mere 2% of Brazilian crypto investors earn over BRL 50,000.00 (USD 12,000) annually. Considering these statistics, it is clear that it is Brazil’s lowest earners who are showing the most significant interest in Bitcoin.
It might seem like these lower-earning groups are the least likely to invest in such a volatile market. However, their interest makes perfect sense when you consider it against a few key factors. Firstly, there has been a massive increase in the accessibility to knowledge about cryptocurrencies and related technologies. Due in part to 2017’s dramatic bubble, we see a far broader sphere of familiarity with cryptocurrencies globally and an increase in the number of crypto-centric media, news, and information outlets online. What once was only broadcasted on elite Telegram channels can now be easily found on websites like BNN.io. Second, is the lower entry threshold and third is how creating a wallet or registering for a cryptocurrency exchange drastically decreases one’s reliance on what the Atlantic called Brazil’s “insane bureaucracy.” Compared to the woes of a traditional financial market where low-income participants are more often than not given the short end of the stick, crypto certainly seems like a sound choice for Brazil’s lowest earners.
What is further indicated by the data is a gradual shift from traditional savings to the adoption of long-term financial strategies to be played out in the cryptocurrency market. Studies show there is a relatively even division between those who also hold more traditional assets (55%) and those who are only holding cryptocurrency (45%). What’s more, a sizable percentage of Brazilians have turned to cryptocurrency to solve their dissatisfaction with traditional financial systems, with 72% reporting they invested in these assets as an alternative to conventional banking.
Regarding knowledge base among Brazil’s crypto users, the interviewees state that they are familiar with the most basic terms such as ‘cryptocurrency,’ ‘wallets,’ and ‘blockchain’ (93%, 88%, and 85%). As for more complex terms, such as ‘double spending’ and ‘Proof of Work (PoW),’ relatively high averages persist, with each respectively having 44% and 51% of people reporting familiarity. Given the economic standings of the interviewees, this data is quite impressive. One could even speculate that these findings indicate market participants have sought additional information on the concepts and terms involved in the cryptocurrency industry. Perhaps this can be read as an indication that Brazilian crypto holders are leaning towards the long-term, especially considering that the majority of those who invest heavily in the cryptocurrency market (79.6%) say they are motivated by long-term returns, while only 54% say they are also looking for short-term profits. As for other motivations, the percentage of people who said they had invested because of advertising or on the recommendation of family and friends turned out to be quite low, with 78% and 60% of respondents, respectively, denying these claims.
The fact that at least half of the interviewees were aware of the market in mid-2017 indicates that the technologies increased news presence stimulated people to seek more information about cryptocurrencies. It is likewise enlightening to see that friends, family, and trends played less of a role in making these financial decisions. The most disadvantaged people seem to understand better than counterparts that cryptos disruptive nature is part and parcel of its appeal.
It is clear that interest in the topic remains active. Seeking to craft a better understanding of what the profile of those who invest in Bitcoin and other digital assets in Brazil looks like, two students from the Fundação Getúlio Vargas (FGV) Administration course prepared a Course Completion Paper – Trabalho de Conclusão de Curso (TCC) – oriented toward this subject. The TCC paper aims to “provide a clearer view of the cryptocurrencies investor profile in Brazil and the potential for non-investors to enter the market.”
Further, the paper analyzes the motivations of crypto investors, the type of wallet they maintain, the presence of traditional investments in their portfolios, their familiarity with market terms, and lastly, what motivates people not to invest in the market. In addition to the above stated, the paper likewise provides valuable demographic data, outlining a complete profile of average investors. What results from all these objectives is one of the most comprehensive works on common crypto users ever carried out in Brazil.
The study examined first buys and determined that most of the investors entered the market in the second half of 2017, which coincides with Bitcoin’s recent boom.
Most of the interviewees are from the normally less likely to invest middle or lower working class, which may indicate that cryptocurrencies are acting as a gateway into the world of strategic investment for many Brazilians. Potentially, crypto could even replace the savings notebook, which is currently the country’s most popular form of investment.
What is also clear is that the hype of 2017 coupled with the losses seems to have had less influence on the investment choices of Brazilians than many had previously imagined. The growth in the value of these assets – mainly in the second half of last year – helped to motivate investors to seek short and long-term profits. It remains to be seen what 2018 reserves for those who are patient, maintain their wallets, and keep to their investment strategies.
In Brazil, Bitcoin’s Trade Volume Exceeds Gold’s
Bitcoin’s trade has exceeded the volume of gold in Brazil, which, given the financial problems that Brazil is facing at the moment, is a very telling statistic about cryptos future. To spell this claim out with numbers, Bitcoin’s trades reached a volume of R$ 164 million, while gold spot contracts were only attributed to R$ 153 million. Putting this into USD values shows us that there is a $3 million difference between the two markets. This trend only strengthened as 2016 progressed, with the Bitcoin trade reaching twice the value of the gold trade in that month. Crypto exceeding the volume of gold in Brazil is another vote of confidence for the Bitcoin ecosystem.
Despite these strong figures in Brazil, gold remains an asset with higher trading volumes compared to Bitcoin. The London Bullion Markets Association reports that the average daily volume of gold trades is $20 billion. Bitcoin, only seven years old, has an average daily volume of $1.5 billion. However, this is quite significant for the cryptocurrency, as it has often been referred to as “counterfeit money on the Internet.”
BitValor, a website tracking the volume of Bitcoin’s trades across the country, indicated that there is a significant increase in the volume of trades compared to the entire year of 2015. Nevertheless, 2015 was a successful year, with exchanges reporting a volume of trades of R$ 113 million over the course of twelve months. In the first half of 2016, Bitcoin’s volume of trades was equal to that of the previous three years in all Brazilian crypto exchanges.
At the moment, it is not known where this sudden interest in the Bitcoin trade comes from. But residents also see problems on the horizon. Bitcoin is a solid way to diversify a wallet; that’s impossible to deny.
Brazil’s Government Requests AML Information From Crypto Exchanges
In pursuit of the same growth that is taking place in the crypto community, the exchanges recently received a questionnaire from the Attorney General’s Office of the Ministry of Finance requesting information on their operations and the measures they employ to prevent money laundering and the financing of terrorism. The requirement was made in the framework of the FATF (Financial Action Task Force) recommendations to protect the integrity of the financial system.
Portal do Bitcoin made the announcement after it had access to the document sent by prosecutor Ana Paula Bez Batti, which states that the answers will form part of a confidential dossier. As indicated, the questionnaire requests data ranging from compliance with limits offered to customers to the hash of crypto exchanges wallets.
According to the report, the fourteen question questionnaire was sent to the exchange platforms through the contact forms on their websites. In its contents, it states that the information requested will support a “study for the Fight against Corruption and Money Laundering.” The exchanges had a five-day deadline to answer questions and submit the required information.
Among the most salient information requested by the prosecutor, Bez Batti, are the methods used by trading platforms to verify their clients’ registration documents. This request includes deposit limits in cryptocurrencies or other currencies; identification of the origin of deposited funds; hash of wallets (hot and cold) where the exchange stores users cryptocurrencies; and whether trade with anonymous cryptocurrencies such as Monero, Zcash, and Dash. The application also includes financial information on crypto exchange partners.
The cryptocurrencies exchanges seem to have conflicting opinions on the injunction issued by the Brazilian Treasury Prosecutor’s Office. The information summarizes, without identifying the sources consulted, that some startup claimed to have answered the questionnaire in its entirety, while others indicated that they would not respond to a document that is not official.
A similar request for information from crypto exchanges by official bodies was recently made known in Chile. In that case, Buda.com platform provided data on its user’s transactions to the tax authority of that country. However, startup managers pointed out that the request had a clear legal basis.
An Expert’s Opinion
We were able to contact Marcos Morais, a Brazilian fintech advisor, who currently works for BleuTrade Crypto Exchange. He gave us his opinion on Brazil’s economy in relation to cryptocurrency.
BNN: Tell us about yourself, your projects related to blockchain technology, and your role at Bleutrade.
Morais: My name is Marcos Vinicius de Morais. I am completely passionate about cryptocurrencies and Blockchain technology. I have been immersing in this field since the middle of 2016. I work on Bleutrade as an advisor. In fact, I am in charge of looking for new projects to be added on Bleutrade exchange and for new partnerships for our exchange.
BNN: Brazil has the most robust economy in the region, however, according to the latest research from “O Perfil do Investidor de Criptomoedas no Brasil,” compared to figures from other South American countries, adoption and trading in Brazil have not grown as fast as in Venezuela (to mention an example). Do you think this is partly because countries in serious crisis are looking more urgently for alternative solutions in cryptocurrency?
Morais: This is a really great question. I don’t think we have a correct answer for it. But from my perspective, at our current stage, Bitcoin and cryptocurrencies are developing better in countries that are facing some type of crisis (like Venezuela and Zimbabwe).
BNN: Could you indicate other factors besides those mentioned above that could be holding back mass adoption in strong economies such as Brazil?
Morais: In Brazil, we have positive things and drawbacks about cryptocurrencies adoptions. As a positive perspective, we can quote the fact we have more investors of cryptocurrencies than investors on the stock market (number of users). As for drawbacks, I think the volatility of the crypto market and lack of regulation are the main reasons that are preventing crypto become mainstream. Another factor is usability. It isn’t easy to use crypto on our daily basis. However, I think these issues will be overcome in the next five years.
BNN: The Brazilian government recently requested information from crypto exchanges on money laundering prevention. Tell us your opinion about this. Have the exchanges taken it well? What do you hear from users? Are there any companies that have not welcomed these requests from the state?
Morais: We prefer not to comment on this question. But have in mind that we always think on the best for our users.
The Brazilian economy is just one of several cases that exemplify how cryptocurrency is maturing into a viable solution to the problems inherent in traditional, centralized systems of finance. One ought not to call it a fluke that the data indicates cryptocurrency is overwhelmingly being used by Brazil’s middle and working class, as the same is evident at the macro level when it comes to countries boasting similar governmental and economic circumstances.
Meanwhile, Brazil and surrounding regions must wait patiently for Morais’ predictions to come true. If Morais is right, in the coming years, there will have already been remarkable progress with more on the way. Ideally, crypto enthusiasts in Brazil are looking at a future wherein usability has brought about mass adoption and government regulations—instead of unabashedly stifling innovation— are actually doing their jobs by helping negate scams and clear the space of bad actors.