Brazilian companies used crypto on election day as the real fell after Lula's win

Companies moved into crypto as Brazil's currency dropped

Brazilian companies bought large amounts of crypto on election day, the exchange Mercado Bitcoin said. The surge happened after incumbent President Luiz Inácio Lula da Silva, known as Lula, unexpectedly defeated Flávio Bolsonaro in the second round.

Corporate accounts made up 78% of trading volume on Mercado Bitcoin on election Sunday. The move was described as companies trying to protect their money, or treasury, from swings in the Brazilian real, the country's currency, while traditional stock markets were closed.

Trading numbers on election day

• Corporate accounts drove 78% of Mercado Bitcoin's election-day volume, the exchange said.


• Trading of USDT, a stablecoin tied to the US dollar, jumped nearly 800% compared with the previous Sunday.


• Bitcoin trading volume rose 865% from the previous Sunday.


• The next day, the benchmark Ibovespa stock index fell 14%, its worst day since 2020, and the dollar rose more than 8% against the real, its largest daily gain since 1999.

A stablecoin is a type of crypto asset tied to the value of a currency, in this case the US dollar. It lets people hold an asset that keeps a similar value to the dollar even when their local currency falls.

What the election results showed

The election had surprised many observers. Markets had viewed Flávio Bolsonaro as the likely winner, with a high chance of winning. Lula won instead, on a plan that included more social spending and a ban on online betting that would cut tax revenue.

Those policy ideas raised concerns about Brazil's budget. Higher debt, new spending and little room to raise taxes could make it harder to keep borrowing costs down.

What Mercado Bitcoin said it means for investors

Pedro Fontes, a research analyst at Mercado Bitcoin, said the episode shows why investors may not want to rely only on the real. "In this scenario of higher exchange rate pressure, stablecoins, such as USDT and USDC, are a simple way to dollarize part of your assets, at any time and starting from low amounts," he wrote. A stronger opposition in Congress could also complicate efforts to fix fiscal problems, he added.

What still needs to be watched

The exchange said companies sought to hedge currency risk, but the reporting does not give details on how much money each company moved or exactly which assets they bought beyond USDT and bitcoin.

Source

• CoinDesk