Wednesday, January 19

Bitcoin was the biggest inflation protection of 2021

Considered a “volatile and dangerous cryptoactive” by authorities around the world, Bitcoin was the biggest inflation protection of 2021.

Bitcoin is a digital currency forged in the 2008 crisis, being the first truly decentralized and uncontrolled by companies and states. With this story, there was everything to go wrong, since “it has no control”.

Despite its uncontrollable nature, Bitcoin has silenced its critics, ignoring market noises about its technology. The year 2020 had already been a taste of this power, when Bitcoin appreciated 300% against the Dollar and left a strong crisis behind. Against the Real, that year, the increase was 400%.

At the end of another year, the second in a row, Bitcoin ends its cycle with an increase of 63% against the Dollar, in a year in which US inflation is expected to surpass 7% in the 2021 consolidated statement, since by November it already was 6.8%.

This inflation rate, it is worth remembering, is just what the government discloses, not what the commerce and population actually work with.

Bitcoin was the biggest protection against inflation in 2021 in Brazil

According to a survey carried out by FinDocs, Bitcoin ended the year with a positive 72% return, after a year of political turmoil in Brazil. US shares of the S&P 500 were ranked second in the survey, up 29%.

With inflation expected for 2021 above 10% in the country, these were the only options for those living in Brazil to protect themselves from the phenomenon that melts people’s purchasing power.

In practice, this means that anyone who left a R$1,000 note under the mattress at the beginning of 2021 has a purchasing power of around R$900.00 at the end of the year, considering only the IPCA in that account.

Investors in Brazilian Real Estate Funds and Equities were on the opposite side, with a negative return, which worsens even more with high inflation. A traditional store of value in previous crises, gold had a negative real yield in 2021, as its variation was below inflation.

Will Brazilian currency compete with the Dollar?

Despite all this scenario, the Real went sour for the fifth year following the loss of value against the Dollar, showing that the moment for the national currency is not good. The Central Bank of Brazil struggled with this meltdown, raised the Selic rate, but this did not contain the rise in the Dollar and much less in inflation.

To try to get around this situation, the government sanctioned last Thursday (30) the Lei n.º 14.286, of December 29, 2021, which allows the Dollar to be stored by people living in Brazil, even under the supervision of the Central Bank.

This law provides for the modernization of the national exchange rate, a sector that has been devastated for five consecutive years and the population has seen the Dollar close to 2021 quoted at R$ 5.57.

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