Brazil’s Google Searches For Bitcoin On The Rise Amid Weakening Real

News, Opinion | May 10, 2021 By:

Bitcoin’s latest bull-run — recent profit-taking notwithstanding — has captured the attention of investors around the world, including Brazil. Google Trend searches for the flagship cryptocurrency are on the rise in the Latin American country, with Brazilians looking to understand more about bitcoin’s creator, Satoshi Nakamoto, as well as Elon Musk after his company Tesla recently acquired USD 1.5 billion in bitcoin. Brazil’s bitcoin-related searches on Google are most prevalent in states such as Santa Catarina and Rio Grande do Sul as well as the capital city of Brasilia. 

After rising 70% year-to-date at last check, Bitcoin continues to outperform other asset classes, leaving rival safe-haven asset gold in the dust. In addition to its use case as a store-of-value asset, bitcoin is also used for payments. Considering that bitcoin transactions can be done in close to real-time at a fraction of the cost of traditional payments, the leading cryptocurrency has become especially popular in developing economies where consumer prices are running rampant, like Brazil. Inflation in the country rose above 6% in March. Now investors have another option, as Brazil has become a first-mover after regulators approved the maiden bitcoin ETF in the Latin American region. 

Bitcoin ETF 

QR Capital, a Rio de Janeiro-based asset management firm, was granted approval by the Brazilian Securities and Exchange Commission (CVM) for a bitcoin ETF. At first, the fund will be offered to qualified investors. In June, QR Capital plans to open the ETF up to retail investors by listing it on the B3 Stock Exchange in Sao Paulo under the symbol QBTC11. Demand is expected to be through the roof, as some 4 million Brazilian investors have access to the B3 exchange. So far, QR Capital has received interest from family offices and sophisticated investors, according to reports

QR Capital President Fernando Carvalho is quoted by CNN Brazil as saying,

“Until now, the investor only bought in unregulated markets, with ETFs, access will be more democratized.” 

The bitcoin ETF tracks the performance of the bitcoin price and gives investors the opportunity to trade the fund on the stock exchange. While the United States has yet to green-light one of these investment vehicles, Brazil has become a first-mover. The regulatory nod came on the heels of a trio of similar bitcoin ETF approvals in Canada on the Toronto Stock Exchange. 

Brazil’s bitcoin ETF will be completely comprised of BTC, unlike some other investment funds that hold a limited percentage of cryptocurrencies. One such fund, the Hashdex Nasdaq Crypto Index, which goes under the symbol HASH11, replicates the Nasdaq Crypto Index (NCI). In addition to bitcoin, it holds altcoins such as Ethereum, Litecoin, Chainklink, Bitcoin Cash and Stellar. As Brazil’s first cryptocurrency ETF, HASH11 was poised to begin trading on April 26. 

The cryptocurrency community has been pushing to bring bitcoin into the mainstream. One way to do this is through a bitcoin exchange-traded fund, or ETF, through which retail investors can gain access to BTC in a way that is as simple as buying a stock. In doing so, they don’t have to worry about managing private keys, which is one of the complicated traits inherent with buying bitcoin directly. In addition, the bitcoin ETF will be a regulated investment vehicle, which will give investors greater confidence about being protected when gaining exposure to bitcoin without having to worry about falling victim to scams. 

Meanwhile, Brazil’s fiat currency, the real, has only been getting weaker as the central bank continues to pump more supply into Latin America’s largest economy. The devaluation of the real coupled with the country’s sky-high inflation only makes bitcoin more attractive to Brazilians. 

Bitcoin’s total market cap has been hovering at the USD 1 trillion mark of late, recent volatility notwithstanding, rivaling and even surpassing the size of the entire Brazilian stock market at times. 

According to a recent Reddit thread, Brazilians are not surprised. One Reddit member suggested that this dynamic between the real and bitcoin was “fitting” considering that their currency is “trash right now.” This member, whose username is “Infectuz,” said that they were trying to get family members to jump on the bitcoin bandwagon, with some success, pointing to the BRL as the “tipping point.” 

The jury is still out on how knowledgeable Brazil’s population of 212 million is on the leading cryptocurrency, according to the Reddit thread. Some members suggest that many are aware of bitcoin, but that the cryptocurrency’s reputation was tainted by past scandals. Another member suggested that while many Brazilians have heard about bitcoin, only a small percentage actually have the money to buy some. 

Brazil Inflation 

The bitcoin ETF could be just in time for Brazil’s troubled economy. Soaring inflation coupled with a resurgence in COVID-19 cases has made it difficult for business owners to afford inventory and families to pay for groceries. 

One hairdresser spotlighted by the Financial Times explained how when she was finally able to return to work after seven months of restrictions, the price for products such as gloves and hair color had gone through the roof, soaring by 200% and 100%, respectively. As a result, this business owner was forced to pass those higher costs onto her customers. 

Meanwhile, with 21% of Brazil’s population living in poverty, a rate that is expected to rise this year, according to the World Bank, many households have been forced to go hungry at the worst possible time. Millions of Brazilians can reportedly no longer afford stable items like rice and black beans, whose prices are up 64% and 51%, respectively, in the 12-month period to March 2021. Conditions could get worse before they get better, with inflation in June poised to surpass 8%, higher than previous projections.

According to research, some 4 million people remain unbanked in the Latin American region while 400 million people have no access to a traditional bank account. While a bitcoin ETF might not be able to solve all of Brazil’s economic troubles, it could give the country’s citizens a fighting shot at gaining access to the financial services that they are so often excluded from.