Cryptocurrency Used As A Long-Term Investment Tool By Latin American Users

(Sponsored) A Binance survey has revealed the motivations behind Latina American holders of cryptocurrency.

The results show that half of Latam investors, buy and hold the likes of Bitcoin and Ethereum as long-term investments.

Nearly one in five holders enlist in day trading for profits while just 8.4% use it for P2P transactions and less than 5% make transactions using cryptos.

An Expanding Market

According to Coinmarketcap, there are currently more than 10,000 cryptocurrencies. Although many of those currencies are defunct or see little to no activity, the crypto industry is packed full of potential investment opportunities with new Coinbase listings being added virtually every month.

Those new listings themselves can represent an opportunity for significant profits. Crypto writer, Michael Graw, highlights the fact that coins appreciate 91% in value, on average, within a few days of being listed on Coinbase.

He highlights that, on average, coins increase in value by 91% within just a few days of being listed on Coinbase.

This appreciation indicates a quick return on investment for those who engage early with new listings.

Cryptocurrency Acceptance

More than 15,000 businesses around the world accept cryptocurrency payments, including the likes of Microsoft, NordVPN, AT&T, Overstock, and even Tesla.

Many websites, such as digital service providers and online casinos, now accept cryptocurrency payments directly.

Others use payment gateways that convert Bitcoin into local currency at the point of transaction. However, the practical use of cryptocurrencies in everyday physical transactions remains limited.

For instance, few landlords or mortgage companies accept rent or mortgage payments in cryptocurrency.

While AT&T allows customers to pay for phone contracts with crypto, most utility and other regular bills still require conversion to fiat currencies.

This illustrates the ongoing challenges of integrating cryptocurrency into mainstream financial transactions.

Such is the difficulty in spending cryptocurrency that only 4.9% of Latin American users say they use their cryptocurrency holdings to purchase items.

Remittances

Despite the cross-border benefits cryptocurrency offers, only 3.4% of users said they use cryptocurrency for remittances.

Cryptocurrency transfers cost a fraction of bank payments, wire transfers, and cash transfers, and the payment is complete in seconds or less.

However, cryptocurrency remittances do require that the sender and recipient have cryptocurrencies, wallets, and the ability to transfer the money to local funds, adding layers of difficulty to the process.

Other Cryptocurrency Uses

8.2% of users said they use cryptocurrency for decentralized financial apps, which can include features like crypto loans and staking.

8.4% use the currencies for peer-to-peer (P2P) transfers. P2P transfers are virtually instant and attract minimal costs.

They are also private and pseudonymous. But, as with remittances, they do have a lot of requirements from sender and recipient, which puts some users off.

Trading And Investing

Cryptocurrencies are used for daily trading by 18.8% of Latin American holders. Cryptocurrency is considered a highly volatile market.

Daily moves of 5% are commonplace in cryptocurrency, with significantly greater increases and decreases on some days.

This means cryptocurrency day trading has the potential for a lot of profit, albeit with a significant risk of substantial losses.

Traditional markets including stocks and shares, foreign currencies, and commodities rarely see this much movement in a day. While they are considered lower risk, they also carry less potential upside.

The most common reason that investors hold cryptocurrency in Latin American countries including Brazil as well as Argentina and Mexico, is for long-term investment.

Commonly referred to as holding, or hodling, this means buying a cryptocurrency and leaving it in a secure wallet for months or even years.

Long-term investing requires less work than day trading but has the potential for long-term growth.

Latin America An Important Market

Announcing the results of the survey, Binance’s regional vice president for Latin America said the Latin American market is already important to Binance but there is significant room for growth in individual markets, looking at their main motivations for buying.

Crypto Motivations

The survey also asked crypto holders for their motivations when trading into crypto. The potential for high yields was the most commonly cited reason with 20.3% of respondents giving this as their main motivation.

15.2% pointed to financial freedom while other reasons for a move into cryptocurrency also included portfolio diversification and privacy, as well as innovation and devaluation hedging.

Cryptocurrency Exposure

Cryptocurrency investment has become easier in 2024, following the launch of globally popular Bitcoin ETFs.

In the US, the Securities and Exchange Commission gave the go-ahead for the trading of spot ETFs in January and products hit the market the day after getting the green light.

In March, the most successful of the ten or so ETFs that launched, BlackRock’s iShares Bitcoin Trust ETF, expanded its offering to the Brazilian stock exchange.

Trading an ETF means that buyers do not need to have cryptocurrency wallets or use exchanges.

It also means they can rely on experienced fund managers to invest, potentially avoiding the large losses that cryptocurrency can be subject to.

More recently, Ethereum ETFs have also been launched and there are plans for global ETFs to launch in Latin American countries, too.