While the majority of news outlets have been focusing on the upcoming election results in Brazil and Jair Bolsonaro losing his place in public office, there are other stories that are just as important. One interesting trend involves the growing popularity of cryptocurrencies throughout the country.
This might seen a bit counterintuitive at first glance. After all, why would a financially struggling population be keen to learn about crypto in Brazil? As many have difficulty making fiscal ends meet, the notion of diversifying a decidedly limited portfolio appears slightly odd. There are actually several reasons why currencies such as Bitcoin and Ethereum have begun to enjoy a growing presence. Let’s take a quick look at what the team at Crypto Lists has uncovered…
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Keeping the Bears at Bay
It’s first important to take a look at this situation from a macroeconomic perspective. It is a well-known fact that Brazil is currently experiencing a volatile economic outlook. However, somewhat bearish undertones do not paint the whole picture. As Bloomberg note, Brazil is still outperforming its South American peers in terms of regional bonds as well as currencies (1). Citizens are likewise optimistic that the upcoming election results will lead to greater top-down financial responsibility.
In other words, many Brazilians are cautiously optimistic about what the near future may have in store. It stands to reason that those who possess the liquidity will therefore be looking to diversify as opposed to relying upon a banking system that has been less than transparent in the past. Although the short-term economic outlook is far from bullish, things may be about to improve.
Understandable Inflationary Concerns
Another point to mention involves the rampant inflation that Brazil has been grappling with in recent times. As of September 2022, this rate stood at 12% (2). Although this is not nearly as high as other South American nations such as Argentina, some consumers may still find it difficult to afford basic goods and services.
It stands to reason that individuals might be looking towards crypto in Brazil as a way to offset a weakening Real (R$). This is actually one of the most appealing aspects of the crypto markets in general, as they represent a viable means to counteract flagging domestic currency values.
Upcoming Regulatory Transparency
One of the issues which has plagued crypto in Brazil recently involves a lack of market regulation. This made some skeptical about becoming involved, as they were afraid of falling victim to a “wild west” marketplace that could experience extreme bouts of volatility. The good news is that things look as if they’re about to change.
The Brazilian Senate Committee on Economic Affairs recently voted in favour of a new package known as the Crypto Regulation Bill. The main intention here is to provide a greater sense of transparency to the marketplace. In turn, this should attract more investors. Such a move makes a great deal of sense when we point out that demand for Bitcoin in Brazil and other digital currencies has exceeded conservative forecasts. This also brings us to the next main point.
Institutions are Beginning to Take Notice
Banks are always keen to attract new clients while keeping existing customers loyal. However, many institutions were somewhat reluctant to offer crypto-based services until recently. While it can be claimed that they were concerned about oversight, it’s just as logical to assume that they simply didn’t want to see customers transfer their money into the blockchain.
Still, many seem to realise that it has become impossible to stave off the inevitable. It is for this reason that major fintech institutions such as Nubank have rolled out services in order to cater to crypto-keen customers. Their “Nucrypto” platform currently offers Bitcoin and Ethereum as options. Other banks such as Mexican-based Bitso and international conglomerate Santander are now following suit.
An Undeniable Trend
There is no doubt that cryptocurrencies should continue to make their presence known throughout the Brazilian marketplace. In fact, a recent study found that an impressive 41% of those surveyed stated that they owned currencies such as Bitcoin (3).
Let’s still point out that regulatory hurdles will need to be overcome. Rampant inflation could likewise cause some consumers to hide their money underneath the proverbial “mattress” as opposed to learning towards the crypto markets. Either way, these digital transactions are here to stay.