Brazilian investors strongly prefer crypto products, although the global market has been severely volatile with no clear signs of ending. Investors are placing their confidence in the industry, displacing traditional financial investment goods such as stocks and precious metals.
Specifically, 33% of Brazilian respondents expect to acquire cryptocurrencies such as Bitcoin (BTC) during the next 12 months. The leading investment is cryptos, followed by real estate with a 26% share, and equities in third place with 22%. Credit cards are also among the leading investment products, ranking fourth with a 21% market share, while savings accounts are fifth with a 15% market share.
With a 26% share of all financial instruments in use in 2022, cryptocurrencies rank fourth elsewhere. Digital assets lag behind checking accounts (73%), credit cards (72%), and savings accounts (55%) in terms of prevalence. Notably, the poll was performed between October 1, 2021, and September 22, 2022, with 2,024 participants aged between 18 and 64.
Factors influencing crypto adoption in Brazil
The aim of Brazilians to invest in cryptocurrency might be related to causes such as the current economic upheaval. Notably, Brazil has been hammered with high inflation and devaluation of the native currency. Cryptocurrencies emerged as a hedge for investors looking to protect their capital and profit from arbitrage in a severely unequal economy.
Moreover, a considerable portion of the population lives below the poverty line while accessing mobile banking services that facilitate the acquisition of digital assets. Smartphone penetration is regarded as a crucial driver for crypto acceptance.
Overall, the emergence of cryptocurrencies has enabled financial inclusion for the masses by making saving, spending, and protecting the value of money more accessible to citizens. Cryptocurrencies also meet the needs of crypto enthusiasts who consider various assets a path to financial freedom.
Diverse banking industry advances are facilitating a more seamless banking experience for Brazilians, whose demand for crypto-currencies is increasing. Neo-banks’ emergence facilitates the purchase, storage, and sale of cryptocurrencies.
The trend can be attributed to the country’s young population, the majority of which prefers to invest in cryptocurrencies, driving the sector to become a robust investment and payment option.
In addition, an avalanche of bitcoin companies is targeting the expanding Brazilian market. Several crypto exchanges, including Binance, have previously stated that Brazil is an important strategic market with immense potential. Coinbase also intends to establish an engineering cluster in Brazil.
Crypto dwarfs conventional financial instruments.
The poll results indicate the potential of the crypto sector, with digital assets scoring higher than traditional products such as stocks. As inflation and interest rate increases prevail in 2022, equities and cryptocurrencies have primarily corrected. Investors are also attempting to profit from the bear market by accumulating other assets to benefit from the proponents’ assertion that cryptocurrencies will recover.
Unlike stock products, which operate within a well-structured ecosystem, cryptocurrencies remain highly unregulated. With the Brazilian Stock Exchange’s introduction of exchange-traded funds (ETFs) tied to Bitcoin and Ethereum, traditional players are warming up to the cryptocurrency sector. Some ETFs have already been established as the most lucrative investment option. Conventional financial institutions’ forays into cryptocurrencies can be considered a technique for enhancing the user value proposition.
The control factor
In addition, the intention to purchase cryptocurrencies will be influenced by factors such as the regulatory landscape perspective. Despite crypto space expansion, most investors have remained on the sidelines due to a lack of regulation, given that the Terra (LUNA) ecosystem catastrophe and the FTX crypto exchange collapse contributed to 2022’s market decline.
The potential implementation of laws has caused institutions such as banks to hustle to recruit cryptocurrency developers. An earlier study highlighted the enthusiasm by noting that Brazilian challenger bank Nubank acquired about one million bitcoin customers in less than a month after introducing the service.
However, Brazilian legislators are reviewing crypto regulations to create guidelines in response to the country’s growing interest in digital assets. As a result of government involvement, the nation recorded action around the rollout of a test of central bank digital currency (CBDC).
Simultaneously, the Brazilian Chamber of Deputies approved a bill regulating the crypto sector. The new proposed regulation requires the executive branch’s consent to become law.