According to what was revealed a few days ago by a Brazilian economic newspaper (Valor Economico), there has been a real boom in crypto purchases in Brazil.
The newspaper quotes an official report from the Brazilian central bank (Banco Central do Brasil, BCB) that collected data from 2023 and the first quarter of 2024 regarding exports and imports.
Summary
The boom of crypto purchases in Brazil in 2023/2024
Within the category of imports, in the BCB report, there is a subcategory dedicated to crypto assets.
In fact, the cryptocurrencies purchased by Brazilians on foreign exchanges are considered imports in all respects, as they constitute outflows of money from Brazil to abroad.
Valor Economico reports that, according to what was stated in the central bank’s report, in 2023 cryptocurrency imports in Brazil reached a total value of $12.3 billion, and in the first three months of 2024 they have increased even more.
Indeed, in the 12 months ended in March, they rose to 14.8 billion dollars, with an increase of 20%.
The absolute monthly record was recorded in the month of March, when Bitcoin reached a new all-time high value: 1.75 billion dollars of crypto imports in Brazil in just one month.
Although these numbers may not seem particularly high when compared to the $60 billion daily trading volumes worldwide, it is important to remember that Brazil is not among the wealthiest countries in the world.
The situation in Brazil
Although the country has about 220 million inhabitants, which places it in seventh place in the world in terms of population, its GDP per capita is only in 58th place in the world.
As a whole, Brazil produces more GDP than Canada, Russia, or Australia, but these are all countries with much fewer inhabitants.
In other words, Brazil is in the top 10 of the largest countries in the world by GDP mainly due to its large population.
Considering instead the GDP per capita, it turns out to be worse off than Turkmenistan, Montenegro, and Argentina, and much worse off, for example, than Mexico or Bulgaria.
In other words, on average, Brazilians are not rich at all, so it is likely that they do not have many funds to invest in financial markets.
As for their currency, the Brazilian Real, its value has remained fairly stable since the beginning of the pandemic in 2020 until today.
Even inflation in Brazil is only slightly elevated, with a 3.9% in March that is almost in line with that of more advanced economies.
So at an economic-financial level, there don’t seem to be any particular reasons that could push Brazilians to turn to crypto markets.
The issue of recent crypto purchases in Brazil
Moreover, the sensational data from March 2024, regarding crypto imports in Brazil, turned out to be even 118% higher than that of March 2023, so it was a real boom, driven by the crypto bull run.
At this point, one might think that the underlying reason could be FOMO, namely the search for quick and easy gains in the short term driven by the enthusiasm of the bull run.
Valor Economico reports that there are economists who believe that the fact that Brazilians have purchased more cryptocurrencies is due to the fact that they have paid more attention to the good performance of Bitcoin and have tried to take advantage of it.
According to the chief strategist of Warren Investimentos, Sérgio Goldenstein, this volume of cryptocurrency imports is not negligible at all, and indeed should be considered a very significant number for Brazil, which weighs on the trade balance with foreign countries.
In total, in March 2024, Brazil imported goods from abroad for a total value of 20.5 billion, so the 1.75 billion dollars of crypto imports actually had a significant weight.
The volumes exported were instead almost 28 billion dollars, moreover significantly higher compared to February, so the crypto import actually did not put the country’s trade balance in crisis.
The possible solution
However, the real problem could lie in the eventual solution adopted by the Brazilian government to contain or try to reduce these outflows of capital abroad.
If on one hand the optimal solution could be to favor national exchanges and miners, it is more likely instead that any initiative could go in the direction of greater control of exported capital.
So it can be imagined that the government may want to impose limitations, in order to contain or reduce the sending of capital to foreign exchanges to purchase cryptocurrencies.
However, we must also take into account two other factors.
The first is that the boom may have stopped for now, since from March the price of BTC and the crypto markets as a whole have stopped growing. However, nothing excludes the possibility that they may start growing again, perhaps in the second half of the year.
The second is that, on the contrary, if overall Brazilian crypto trading were to produce profits, the exported capital could potentially return in the near future, theoretically even in greater quantities.
In this second case, however, it must be remembered that generally retail investors and speculators often lose, so the capital returns generated from any gains could be much less than those spent on purchasing cryptocurrencies.
At this point, it is reasonable to expect sooner or later some sort of crackdown by the Brazilian government on foreign crypto exchanges.
