Latin America has known far more than its fair share of economic troubles over the years. Whether it’s populist revolutions, military coups or some other calamity, the rich in the region always had to think of how to protect their wealth from possible confiscation, hyperinflation or whatever may come. Unlike in the past when they turned to offshore banking, real estate and gold, the best solution right now is also easily accessible by the poor and middle class, bitcoin.
A Hedge Against Hyperinflation
At least two new cryptocurrency funds have opened up in 2017 to cater to rich Latin Americans, according to a recent report from the region. While both funds are safely located abroad, family offices from Argentina, Central America, Mexico, and the Caribbean comprise most of their clients.
“Latin America is very volatile,” said Italy-based Carlos Mosquera, founder of hedge the fund Solidus Capital, which focuses on the top eight cryptocurrencies as well as on ICOs. “Cryptos are turning into a new haven for these families.”
Unlike speculators in East Asia and other parts of the world who ‘discovered’ bitcoin this year due to its incredible price rally and volatility, in Latin America the cryptocurrency is mainly seen as a hedge against economic uncertainty.
Mosquera himself described how the out of control inflation in Venezuela, wiping out people’s wealth and purchasing power, made him realize that bitcoin is the answer. Trading the cryptocurrency also offers a way to bypass the Venezuelan government’s ever harsher capital controls on sending funds abroad or buying USD.
A New Asset Class
The second wealth preserving vehicle for rich Latin American families mentioned in the report is the Miami-based Crypto Assets Fund, which started operations in September. Founder Roberto Ponce Romay commented: “We’re convinced this will become a new asset class, just like stocks and bonds.” He founded his own private equity firm a decade ago and previously served as a manager at consulting firm Bain & Co.
Ponce’s Crypto Assets Fund, which he reports already has $15 million in cryptocurrency under management, acts as a passive index fund, holding each asset by its market cap. He also plans to open a second cryptocurrency fund in 2018, offering active management. His stated goals are to increase the passive fund to $50 million under management and to raise $100 million for the new active fund, focusing solely on cryptocurrencies.
Are Latin Americans the canary in the bitcoin mine as far as rich people are concerned? Tell us what you think in the comments section below.
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Author: Avi Mizrahi