Brazilians never miss a tech trend. They’re rarely ever out in front. But when they follow, they follow for real and stick with it. Within Latin America, look for Brazil to be the cryptocurrency ringleader both on the regulatory side and on the development side. As it now stands, more people are opening cryptocurrency trading accounts in Brazil than traditional brokerage accounts. Brazil has hopped on the Bitcoin bandwagon. It’s not getting off until all four wheels fall off.
A year ago, an exchange called Foxbit had roughly 100,000 registered users. Today, it exchanges around 2,000 Bitcoin to and from Brazilian reals daily and has a 36% market share. They also have 400,000 registered users out of the estimated 1.4 million that have opened accounts with them and their three main competitors in less than two years’ time. Compare that to the roughly 600,000 who have stock brokerage accounts and it’s plain to see: Brazilians have discovered cryptocurrency. In 2016, Brazilians moved $160 million in and out of Bitcoin. Last year, it hit around $2.4 billion.
“For the guys who used to hide dollars under their mattresses, now they are hiding it in Bitcoin,” says Eduardo Ferreira, head of international business development for Foxbit in London. “It’s students buying it. It’s 60-year-old bus drivers,” he says.
Earlier this year, Brazil’s Securities and Exchange Commission, the CVM, banned registered investment funds from trading in cryptocurrencies. They clarified their statement shortly afterward, allowing for indirect ownership. That means Brazilians could invest in funds that had stakes in funds investing in crypto. The rules were supposed to be made clear this month, but as of Wednesday, nothing has been made public.
Like here in the U.S., the disruptors are far ahead of the disrupted, and as this market grows, CVM will become more tuned in to its impacts on traditional brokers, banks and, of course, Brazilians defrauded by savvy marketers. The market is growing fast, so anything can happen on the regulatory front. For now, there are few opportunities to invest in cryptocurrencies, and most of it is in Bitcoin. But as the market grows and more coins are offered, regulators could follow other countries and push back at a moment’s notice.
In the meantime, savvy entrepreneurs are building mini-crypto empires. Rodrigo Marques is an example of a Brazilian tech entrepreneur who got out ahead of the trend. He now has more money at his fingertips than he’s ever imagined. In 2015, fresh off a failed Bitcoin-coffee futures venture in Honduras, gainfully unemployed and living with his parents, Marques created an algorithm to trade Bitcoin based on market inefficiencies in the global exchange system. His road from an adult living with mom and dad to a “crypto millionaire“ sounds all too familiar by now: some tech guy who knows how to code comes up with this new way to put a 0 and a 1 together and yadda yadda yadda, he’s a rich guy.
Two years after toiling away on an algorithm and Marques has 107 employees and runs one of the biggest crypto trading firms in Latin America, Atlas Quantum. Their strategy is simply to trade off the discrepancies in the Bitcoin market by buying for cheap on one exchange and selling it for a bit more on another one. It almost sounds like the kind of “genius” one would expect from Brazilians, a little bit of ginga, a little bit of jeitinho, if not for the fact many South Koreans and Japanese are doing the same thing.
To serve as an example of the breadth of Brazil’s growing Bitcoin prowess, Atlas claims they had just 1,000 clients last June. A year later and they say they have 150,000 clients. Not all of them have money in the cryptocurrency market at this time. But Marques estimates that around 10% of them do, with an average of $2,000 invested.
“I remember back in October 2017 when we hit the threshold of our first million dollars’ worth of Bitcoin under management,” Marques says. They hold Bitcoin for their clients but are not a registered investment firm or making investment calls on cryptos. “Now we have over $35 million under management even with Bitcoin collapsing,” Marques says. “We are doing arbitrage, only with an algorithm. It’s a nondirectional trade that makes money on the inefficiencies, and on the volatility inherent in this very new and global cryptocurrency trading system.”