5 Investors Explain Why Latin America Is Ready to Survive the Crypto Winter

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web3 footboard really took off in 2021 and 2022 as entrepreneurs and investors looked to make their mark on the nascent industry.

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But Latin America stood out due to its comparatively high cryptocurrency adoption: according to Kim Grauer, head of research at Chainalysis, Latin America is constantly captured from 8% to 10% of global cryptocurrency activity. Moreover, the implementation of DeFi has generated a lot of interest given the region’s difficulties with traditional financial management.

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If my savings were in crypto, I would definitely not sleep well these days. But again, I wouldn’t either if they were in Argentine pesos.

Indeed, Argentina is a good example of a country where fiat currency alternatives are looking more attractive as buying US dollars becomes more difficult and expensive. When I spent a few months in Buenos Aires in 2014, dollars were needed all the time, and the best exchange rate you could get was around 10 Argentine pesos to one dollar.

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But after the Minister of Economy of Argentina sharply resigned earlier this month, the unofficial blue dollar exchange rate hit a record 273 Argentine pesos to $1. Meanwhile, there were also restrictions on buying US dollars in the first place.

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Several exchange rates also coexist in Argentina, some of which are artificially unfavorable. Claire Diaz-Ortiz, chairman of the startup committee at VC3, pointed out how difficult it is to escape the traditional banking system: official rate of 130 pesos to the dollar against a market value of 270 pesos to the dollar.

According to her, in such a situation, “it is not surprising that the cryptocurrency is deeply rooted in the local culture.”

Not every Latin American economy is as unstable or politicized as Argentina’s. But there are commonalities across the region, from high levels of poverty to low financial inclusion, that explain why trends such as momentary craze for crypto games to earn money have become widespread.

These factors also give us an idea of ​​where the cryptocurrency might be heading. “We believe that cryptocurrency has a great opportunity to digitalize cash,” said Patricio Utard, co-founder and general partner of Newtopia VC. “That is, if startups in the field can create simple, affordable, reliable, trustworthy and beautiful solutions for the unbanked population.”

Homegrown startups are already playing an important role in the use of cryptocurrencies in the Latin American and global markets. Investors we interviewed believe startups in the region will continue to do so with tailwinds from global investment and partnerships.

The five investors we spoke to are actively supporting Latin American cryptocurrency and DeFi startups. Below, they share their take on where the market is heading, the growing presence of women on the web scene in Latin America, and, as a crypto winter seems increasingly likely, how they are gearing up for a recovery.

We spoke with:

  1. Matthias Nisensonco-founder, Wonderland
  2. Christine ChangHead of Corporate Development and Venture Business Department, Tribal
  3. Patricio Jutarco-founder and general partner, Newtopia VK
  4. Claire Diaz-OrtizChairman of the Startup Committee, VK3
  5. Andy AreitioGeneral partner, venture city

Matthias Nisenson, co-founder of Wonderland

TK: Cryptocurrency is often touted as a cure for those who stay away from traditional banking. What steps are you taking to ensure that cryptocurrencies mitigate rather than exacerbate inequalities in access to finance?

Nisenson: I think we are all working on making crypto an alternative to traditional banking. I also think it will take time. In Wonderland we say DeFi sucks and that’s our URL too (https://defi.sucks). We and many other players are doing everything we can to fix this.

We think it sucks because of UX. Even a smart person can make a mistake that will cost them thousands (if not millions). It also sucked a few years ago because of an infrastructure that couldn’t serve several thousand users at the same time, or because you couldn’t use it from mobile devices. Today, most of these problems are solved with L2. [layer 2 solutions] and better wallets – but UX still sucks.

I believe in DeFi, but it will take time. I believe in Cefi [centralized finance, a mix of traditional finance (TradFi) and DeFi] For now, this is a good solution: it introduces people to cryptography and explains the basic concepts to them. That’s why I invested in Buenbit, one of the largest exchanges in countries like Argentina and Peru. I would prefer CeFi over banks any day.

We’re still in the experimental phase, we’re figuring out the technology, figuring out how DAOs work (or don’t) and a bunch of other things. I believe that this movement is leading the Ethereum community – in comparison, it is only seven years old.

Ethereum creator Vitalik Buterin noted that Argentina has one of the largest crypto communities in the world. As a consumer market, is Latin America currently served more by local or foreign companies?

It depends on the vertical. If we talk about DeFi, then I am sure that the most commonly used protocols are foreign ones (Aave, Uniswap, Compound, Sushi, etc.). If we talk about exchanges, then they are mostly home-grown (Bitso, Ripio, Buenbit, etc.).

This is mainly due to rules and compliance that major foreign exchanges do not follow because it takes time. It is easier to purchase a local exchange with fiat entrances and exits already set (shopping has already begun).

Do you expect this to change soon?

No. I think this ecosystem is global. I believe in products that come out of nowhere (for example, in my home country, Argentina) and reach users all over the world.

It is known that even before cryptocurrency, Venezuelans used games to earn money. While Axie Infinity continues to crumble, do you still see crypto gaming as a way of being?

I think games are a great application for blockchains, especially because of true ownership of assets – meaning you can play a game and then get bored and sell the assets you spent your money and time on.

My latest company, Experimental, was one of the first to launch a blockchain game on Ethereum back in 2017. We spent a lot of time with the founders of Axie, OpenSea and all the OGs of the crypto gaming space.

Having said that, I don’t see games as a magical solution to feed an entire country. I think most crypto gaming economies don’t scale, especially when token issuance is poorly designed and value is created out of thin air.

Have you noticed any unexpected developments or interesting trends related to the adoption of cryptocurrencies in Latin America?

Well, this question is timely. Minister of Economy of Argentina resigned on the weekend of 2 July when the markets were closed. Everyone started talking about the national currency (the Argentine peso, or ARS) “going to zero”, and it happened: 1 US dollar was equal to 238 ARS when the news broke, and 36 hours later it reached 280 ARS.

Thanks to crypto, I was able to short pesos over the weekend! I took out a secured loan on Buenbit, I left DAI (a stablecoin on the Ethereum blockchain) as collateral and they gave me NuARS (an ARS-pegged stablecoin). I used these NuARS to buy more DAI so when ARS drops I can sell my DAI and make a profit.

Another really cool thing is that before crypto, people couldn’t buy US dollars with their ARS on the weekends, but now they were able to do it before the value of the dollar skyrocketed.

Credit: techcrunch.com /

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