Why Brazilians are more adept at cryptocurrencies than French and English

Brazil is a country of extremes, including in terms of the profile of local investors. While most Brazilians have a conservative profile when choosing where to invest their savings and end up opting for savings (37.5%), the growing popularity of cryptocurrencies in the country reveals that part of the population opts for high risk investments in search of high profitability in the short term.

The data are from a survey by the Getúlio Vargas Foundation (FGV) released by E-Investidor on Monday, 13th, entitled “Relevant risk for Brazilian, French and English investors:, which compares the profile of investors in the three mentioned countries. In Brazil, crypto-assets are preferred by 14.5% of investors, almost three times more than among the French (3%) and almost nine times more than among the English.

The proportion of Brazilians who said they invest in cryptocurrencies was just a little lower than the number who say they invest in equity instruments (16.1%), such as stocks, ETFs (index funds) and other risky asset classes. Here, the English lead, with 17.5%, and the French are slightly below the Brazilians, with 12.6%.

The growing adoption of crypto-assets in Brazil is the result of the profile of a particular class of investors that is opposed to a traditionally conservative posture and has a predilection for risk in search of the promise of high profitability and rapid enrichment, says William Eid, coordinator of the Center for Studies in Finance from FGV EAESP and one of the authors of the report:

“The preference for cryptos is caused by this short-term vision, by this need that Brazilians have to get rich soon”, emphasizes Eid. “Brazilians don’t have the patience to invest money and leave 15 years somewhere. for money to multiply rapidly. And cryptocurrencies seem to promise that.”

The statement is supported by survey data that reveals that 76% of Brazilian investors operate with a focus on the short and medium term, while only 24% project their returns over a broader time horizon. In England, the proportion is 64.5% in the short and medium term, and 35.5% in the long term, while in France the proportion is more balanced, with 45.5% and 54.5%, respectively.

Eid says that in Brazil there are more investors who ignore the risks involved in operations with variable income assets and here it is also more common for people to make their choices based on past performance and the opinion of influencers.

Making investment decisions based on these principles increases the chances that investors will end up losing money, says the economist. However, it is precisely these approaches that justify the growing interest of Brazilians in cryptocurrencies. According to Eid, the risks involved do not outweigh the potential returns promised by this emerging class of financial assets.

The opinion is shared by Felipe Medeiros, cryptocurrency analyst and partner at Quantzed Cryptos. “Cryptocurrencies have never been a get-rich-quick market,” he said, contradicting the common sense that took hold of part of Brazilian investors during last year’s bull cycle.

According to him, the best strategy for novice investors is to make small investments, favoring assets with solid market capitalization and, therefore, more resilient to the inevitable fluctuations of this market.

Almost always, investments in currencies capable of generating exponential returns in the short term result in frustration and, worse, loss of at least part of the capital initially invested:

“Investors who enter thinking in the short term, most of the time, leave the market with losses above 50% of the capital. There are great and promising technologies being developed in this market, which can be treated as good long-term investments”.

Investors’ top fears

Definitely losing part or even all of the invested capital is precisely the greatest fear of investors in Brazil (24%) as well as France (37.4%) and England (37.6%), revealed the survey. Second on the list of concerns for Brazilians are liquidity risks, that is, the impossibility of immediately disposing of assets in case of desire or need.

The combination of both fears often feeds back, even more so when the investor operates with a short-term horizon: in the event of a severe devaluation, the investor is compelled to dispose of the asset in order to obtain immediate liquidity and, as a result, ends up doing the damage.

The second major concern of the British and French concerns the variation in profitability. According to Eid, this difference illustrates the lack of financial education of Brazilian investors.

The FGV survey heard 595 people, 200 from Brazil, 198 from France and 197 from the United Kingdom.

As Cointelegraph Brasil recently reported, financial education is one of the fundamental pillars for the adoption of crypto-assets in Brazil to continue expanding, according to Daniel Mangabeira, director of Institutional Relations at cryptocurrency exchange Binance for Latin America.