Brazil’s cryptocurrency was relatively small in early 2017, but with the hype surrounding the sector seeping into the mainstream attention, more and more people got involved as the year went on.
Growth Despite Warning Signs
The first investors tended to be young, tech-savvy people. As the second and third quarter rolled around, the popularity of digital currencies started to explode in Brazil. By the end of 2017, there were more than 1.4 million investors of bitcoin in the country.
For a long time, there have been issues in Brazil when it comes to red tape and regulatory measures even in traditional financial markets. These barriers have led to a prolonged economic crisis which is only starting to recover. The difficulties also mean that there is the added incentive for the Brazilians to get away from government control.
Some are interested in the blockchain technology that underpins these digital currencies, whereas others are interested in the potential profits that can be made through speculation.
Due to the drop in Treasury bond prices in Brazil, which were previously one of the more popular investments for natives, more and more people have been looking for other ways to invest their spare funds. Currently, more people have bitcoin investments than there are invested in both Treasuries and the stock exchange in Brazil combined.
With the demand of digital currencies continually increasing, there has been a significant demand for a variety of exchanges whereby people can trade cryptocurrencies.
Mercado Bitcoin is one of the leading exchanges in the country, and they went from having an average of about 500 new users on a daily basis to having around 5,000 new accounts daily, which is an increase of 1,000 percent.
Of course, this increased demand hasn’t been without its fair share of problems. Due to the significant growth in exchanges, many of them have been struggling to keep up with the traffic placed on their platforms. Ultimately, administrators had to hire more staff and redesign the platforms so they could handle the increased flow of users. This has also led to some exchanges putting a temporary block on new users from signing up.
While the general public seems supportive of cryptocurrencies, the head of the Central Bank in Brazil is not convinced. Ilan Goldfajn made comments that echoed what other central bankers across the world have been saying, that digital currencies are a high-risk investment and it looks like a bubble.
The central bank also clarified with investors that these instruments have not been guaranteed or issued by a single monetary authority. However, this hasn’t affected the actions of the people of Brazil, and it looks like the number of investors is only going to grow.