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The growth of fintech could reduce the risks of the investment portfolio through the inclusion of cryptocurrencies

The cryptocurrency market in Latin America is growing and given this development, there is one particular factor that crypto owners need to consider: diversification. This was pointed out by Andrés Ondarra, Bitso’s Country Manager for Argentina, who shared with Cointelegraph en Español a comprehensive analysis of fintech and cryptocurrencies as investment alternatives and value protection.

On the one hand, fintech companies support the use of financial services and enable their expansion to a larger number of people in order to democratize access to finance.

On the other hand, In the fintech industry, cryptocurrencies stand out as investment and value protection instruments. “Both inseparable axes, Fintech and Crypto, agree in their development trendsor, ”Ondarra highlighted. And then he gave a brief overview of the state of each of these axes in the region and in Argentina in particular.

The growth of fintech could reduce the risks of the investment portfolio through the inclusion of cryptocurrencies
The growth of fintech could reduce the risks of the investment portfolio through the inclusion of cryptocurrencies

“”In Latin America, five markets are leaders in the fintech industry: Argentina, Brazil, Chile, Colombia and MexicoAccording to one of the latest reports available, KoreFusion’s 2020 Latam Fintech Report. According to the advice, these countries have 1,075 fintechs. This year they all achieved an investment of $ 8,092 million, ”he said.

“At the time of the study, 2,800 companies were being examined, 1,725 ​​of which were rejected due to, among other things, insufficient technological developments. Some of the sub-categories that make up the sample analyzed include cryptocurrencies, digital payment platforms, wire transfers, and loans, among others. The case of cryptocurrencies is the point that has grown the most, according to the study mentioned above, and which also has the best chance of growing further, followed by remittances, ”he later added.

According to the five best countries in the region by number of fintechs, the map consists of the following elements:

  • Brazil: 498

  • Mexico: 249

  • Colombia: 128

  • Argentina: 118

  • Chile: 82

Despite the numbers that illustrate strong and sustained growth, it must be taken into account that the most famous cryptocurrency, Bitcoin, appeared in 2008. This implies that it is still a young industry with enormous growth potential.

Another of the recent reports from the Chainalysis (How Latin America Cryptocurrency Mitigates Economic Turbulence) case noted this Latin America sent USD 25 billion and received USD 24 billion in crypto assets. This put the region in second place worldwide in terms of volume and number of transactions.

The chain analysis report also reported on this The trading relationships of the regional importers with East Asian companies have been a key factor in the growth in the use of cryptocurrencies. The volume of Bitcoin transactions from Latin America to this region became the largest in the world during the period provided for in the study (July 2019 – June 2020).

On the flip side, Ondarra said that another cause of the growth in crypto adoption is the popularity that cryptocurrencies have gained among Latin Americans, and that they are used as being, according to Chainalysis Store of value in contexts of lack of access to banking services and economic instability.

This, in turn, may be related to data from another study (How Common is Crypto ?, Published by Statista in August 2020). “There you will find a ranking of the countries with the highest distribution of cryptocurrencies. The top five are in order: Turkey, Brazil, Colombia, Argentina, and South Africa. Meanwhile, the most developed economies are in the last positions. That said, there seems to be an inverse correlation between the level of development of economies and the pace of adoption of cryptocurrencies, ”Ondarra explained.

For this reason in Latin America Consulting firm Chainalysis proposes cryptocurrencies as a tool to avoid inflation and maintain levels of sending and receiving transfers using cryptocurrencies, especially in the recession scenario caused by the COVID-19 pandemic.

With all of this in mind, Ondarra concluded: “On the one hand, the fintech ecosystem in the region is one of the fastest growing;; on the other hand, The volume of operations carried out with cryptocurrencies also makes the countries of the region the most famous in the world, among which Argentina stands out. This means that fintech companies are offering ever more opportunities for investors, with cryptocurrencies being one of the fastest growing and most dynamic asset classes. ”

“This incipient maturity of the crypto ecosystem in terms of adoption must necessarily be accompanied by financial education in order to reap the benefits that fintech companies offer,” he added.

In this context, Ondarra has also reflected on the importance of diversifying investment portfolios: “All financial books have one common denominator: investments must be diversified to avoid the bad luck of volatility. Why? Well, the distribution of your personal investment portfolio is one way of reducing the risk associated with any financial activity. Put in this way, the goal is to encourage the use of various assets: foreign currency, debt, stocks, real estate, commodities, and of course, cryptocurrencies. “

In the latter case, he explained that the difficulty for some investors is that they are often overexposed to one asset class, in certain cases even a single digital currency, implying “too much risk”.

“The variety of cryptocurrencies in a portfolio essentially depends on how much risk the investor wants to take. In addition, it depends on two central factors: the financial goals and the amount of capital invested in relation to the ability to save.”Said Ondarra.

Additionally, he clarified that the goal of storing and trading cryptocurrencies is likely to be to protect yourself from inflation when operating from an inflation country. In such a case, it is possible to have stable crypto assets and reduce the effects of volatility. This is how the so-called stablecoins or stablecoins come into play, which are cryptocurrencies or tokens that are tied to the value of another asset such as US dollars, precious metals, etc.

“Especially, The DAI stable coin has gained in importance in recent months. Appear in word of mouth from communities, social networks, and media. The fact that it is possible to save on a crypto asset with a value equal to the dollar, as is the case with this crypto, provides protection, as opposed to the depreciation of many traditional currencies and assets. In other words, today any portfolio is incomplete without a percentage of cryptocurrencies, ”commented Bitso’s Country Manager for Argentina.

“”Latin America in general, and Argentina in particular, will continue to be very fertile ground for the growth of the crypto market since, as shown, in these countries the search for financial freedom is very high due to the conditions imposed by their economies“, He concluded.

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