Friday, August 12

Foreign exchange specialist blames Bitcoin for the devaluation of the Real

The growing search for Bitcoin in Brazil was presented this month by Bruno Serra, Director of Monetary Policy at the Central Bank of Brazil, according to a report entitled Economic Environment in the Post-pandemic.

Since Brazil does not mine Bitcoin, treated as a product, the import of cryptocurrency has caught the attention of experts who believe that this may be putting pressure on the value of the Real against the dollar.

Other experts do not seem to agree with this opinion, leaving the blame entirely in the hands of the Brazilian government as this amount of “imported” bitcoins is very small in relation to the Brazilian economy.

Import of cryptoactives has grown

According to data from the Central Bank of Brazil related to the import of cryptoactives, collected since November 2017, the total sum of imported digital assets already exceeds 12 billion dollars, equivalent to 66 billion reais.

Import of cryptoactives, 2017-2021. Source: Bacen

This number caught the attention of some people like Rodrigo Natali, Chief Strategist at Inversa, believing that cryptocurrencies have a great influence on the price of the Real against the US Dollar.

As high energy costs and importing mining equipment make it difficult to operate in the country, Brazilians are forced to import Bitcoin from other countries.

Remember that China was the largest producer of Bitcoin until the ban on the activity in the country in May this year. In some periods of the last two years, it is recorded that 75% of mining was concentrated in the country.

This Bitcoin import process was quite complicated in the early years of Bitcoin, Brazilians needed to take several steps to buy the currency.

And even the introduction of national exchanges in 2013 did not overcome all obstacles, with Bitcoin being operated for some periods with giant premiums like in 2017. This problem was later reduced thanks to the listing of stablecoins by these same exchanges, as well as by arrival of exchanges that operate internationally, such as Binance.

opposing opinions

Other specialists such as Fernando Ulrich, Head of Education at Liberta Investimentos, are skeptical about the relationship between Bitcoin purchases and the devaluation of the Real, the fourth currency that has devalued the most against the dollar this year.

According to Ulrich’s latest videos, the rise in the dollar is mainly linked to government programs such as emergency aid, already responsible for spending 108 billion reais. As well as rumors of Paulo Guedes’ departure, which raised the dollar to 5.75, as well as the bursting of the spending ceiling and other factors such as the increase in interest rates by the Central Bank.

In other words, for him, Bitcoin represents a very small part of the pressure on the price of the Real, caused mainly by internal issues of fiscal control and economic policies.

It is worth remembering that although these bitcoins are imported, this money remains in Brazil and the appreciation of bitcoin made investments yield up to 2,600% for those who bought them between January and February 2019.

Dollar hike helped mining in Brazil

While Bitcoin mining is not attractive in Brazil, the dollar’s rise has benefited casual and semi-professional miners of other cryptocurrencies such as Ethereum, mined by video cards.

While Brazil’s energy cost was around 0.20 dollars per kWh in 2017, with the dollar at around 3 reais, the devaluation of the Real caused this cost to drop to around 0.12 dollars according to the USD/BRL is traded in the 5.50 range, enabling better competition with miners from other countries.

Whether or not it impacts the price of the local currency, some countries like Australia are looking to become industry leaders by creating laws that help miners, offering discounts on energy costs, as well as attracting entrepreneurs who create jobs in their countries.