Bitcoin now has more than twice the number of Brazilian investors than the stock market and treasury notes combined.
More than 1.4 million Brazilian tax IDs have been registered in the country’s largest BTC exchanges Mercado Bitcoin and Bitcoin To You.
Brazilian investors have double the incentive to buy Bitcoins, as it is automatically an investment in US Dollars as well. During times of political turmoil, such as the one faced by the country due to the Car Wash corruption scandal, the US Dollar has always been a safe harbor for investors.
In 2018 Brazil will hold national elections, likely ending a cycle of 16 years of administrations from the PT and PMDB political parties due to legal ineligibility of traditional politicians embroiled in the Car Wash investigations.
But the expectation of a market-friendly new administration is far from secured at this point, with leftist candidate Lula still leading the polls. Although Lula may not be able to legally contend for the 2018 presidency, due to his sentencing in the Car Wash trials, the markets fear that he may appoint a leftist candidate. Recent polls suggest that a candidate appointed by Lula may indeed convert a significant amount of his own votes.
With political tension, the US Dollar tends to gain against the Real, something Bitcoin investors appreciate as the Bitcoin is mostly anchored to USD in the main Brazilian exchanges.
Central Bank interest rates in Brazil have recently reached the lowest levels in decades and traditional funds are no longer offering attractive yields. This, combined with the political scenario, have made Bitcoin the target of over 1.4 million Brazilian investors.
Bureaucracy and complicated regulations have also made Bitcoin a popular investment for those trying to escape the country’s extremely complicated economic system. The average time to open a small company in Brazil is over 90 days and it may take years to close down a LLC. Obtaining working permits for small companies (alvará de funcionamento) also require compliance with countless regulations, which over the years have made thousands of companies to flee Brazil into Paraguay, Uruguay and other more market friendly neighboring countries.
One thing is certain, though, Brazilians are moving into Bitcoin in greater numbers than they are into traditional investments and other Latin American countries are sure to follow the region’s largest economy into the world of cryptocurrencies.
Photo: Central Bank of Brazil