Bitcoin Volumes Go Parabolic in Brazil as Real Falls 10%

[Mercury]

A Brazilian exchange has suddenly risen to handle more than a billion in bitcoin trading volumes amid monetary concerns in Brazil.

Negocie Coins shows close to $1.5 billion in BTC/BRL trading volumes for the past 24 hours with bitcoin there at a circa $150 premium.

Bitcoin trading volumes in Brazil go parabolic, May 2019.

How much of this volume is real and how much fake is unclear, but there’s apparently some fiscal turbulences in Brazil.

“Brazil’s real will turn more unstable as it becomes increasingly exposed to a pending discussion of a plan to overhaul the social security system that is proving hard to sell in a divided Congress, a Reuters poll showed.” So says Reuters.

Brazil public debt, May 2019.

Brazil’s public debt levels have spiked, so they’re trying to find some savings in pensions. A tough proposition.

“We expect much headline risk and market volatility in the coming months as pension reform makes its way through the special committee,” said the team of emerging market strategists at Citi in a report last week.

Real has fallen against the dollar by more than 10% since February from circa 3.6 BRL per dollar to now 3.93.

Brazilian Real falls against the dollar, May 2019

If we zoom out, the fall has been far more drastic. In 2008, BRL was not far off from parity with the dollar. Now it is worth circa 75% less in just a decade.

Brazilian real against the dollar on monthly candles, May 2019

From a technical analysis perspective, that kind of looks like a cup and handle. Obviously TA doesn’t necessarily mean much, but if it pans out then Real might be in trouble.
While in 2009-2012 the BRIC country was seeing growth amid a general global contraction, Brazil has recently seen almost no growth and even a contraction.

Brazil growth, May 2019

Inflation there is somewhat high at close to 5%. Interest rates are even higher at 6.5%. Meaning the economy is doing pretty badly and losing in value about 5% a year.

Just what has gone wrong is not very clear, but it looks like people are escaping to bitcoin.

Why not the dollar? Presumably because getting your hands on bitcoin is a lot easier as there’s a crypto exchange in kind of every country.

In addition, a dollar needs a bank account unless you’re just keeping it on an exchange. Even in western Europe, getting a dollar bank account is not very easy. While for bitcoin, you just download a wallet software and you’re done.

Finally, sentiment has changed in bitcoin with some believing this might now rise. So for wealthy Brazilians, getting crypto rather than dollars may make sense.

The trading volumes, therefore, may not be too fake as it appears there’s some good reason for this rise of bitcoin adoption in Brazil.

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