Brazilian firms accelerate stablecoin trading during presidential election

Brazilian companies sharply increased trading in dollar-backed stablecoins during Sunday’s presidential election, seeking protection against currency volatility as the country’s conventional financial markets remained closed.

Corporate accounts accounted for 78% of trading volume on cryptocurrency exchange Mercado Bitcoin on 25 October, when President Luiz Inácio Lula da Silva defeated challenger Flávio Bolsonaro. Turnover in Tether’s dollar-pegged USDT token jumped nearly 800% compared with the preceding Sunday, while bitcoin trading surged 865%, according to figures released by the exchange.

The activity preceded a sharp market sell-off on Monday, when Brazil’s benchmark Ibovespa index plunged approximately 14% and the US dollar appreciated more than 8% against the Brazilian real. The equity decline was the steepest since March 2020, while the currency movement represented the dollar’s largest daily advance against the real since 1999.

Mercado Bitcoin attributed the extraordinary trading activity primarily to businesses seeking to protect corporate cash holdings against exchange-rate uncertainty. Individual investors accounted for the remaining 22% of transactions, indicating that institutional customers dominated activity during the election.

Trading in USDT exceeded three times the average recorded during the four preceding Sundays. The exchange said companies were increasingly using cryptocurrency platforms to manage currency exposure outside conventional banking hours, particularly when political developments threatened abrupt movements in exchange rates.

The surge extended beyond Mercado Bitcoin. Data compiled by cryptocurrency market tracker Biscoint across 10 exchanges showed that trading in USDT against the real increased 150% compared with the previous Sunday. Transactions involving another dollar-backed stablecoin, USDC, climbed 318% over the same period.

Combined USDT and USDC turnover reached 1.84 billion reais, approximately $350 million, on Monday, representing a 65% increase over the corresponding day a week earlier. Bitcoin trading across the monitored platforms exceeded 1,336 coins, more than nine times the previous Monday’s volume.

Binance, another major cryptocurrency exchange serving Brazilian customers, recorded a threefold increase in its USDT/BRL market. Trading volume in its bitcoin-real pair climbed 370%, contrasting with a 25% decline in activity involving bitcoin and USDT on the international market.

Bitcoin appreciated 9.4% against the real while slipping 0.2% against USDT. The divergence reflected the weakening Brazilian currency rather than a comparable increase in bitcoin’s international dollar valuation.

The figures suggest that demand was concentrated in domestic currency markets, where companies and other investors were responding to political uncertainty. However, trading volumes measure transactions rather than net purchases, making it impossible to determine precisely how much corporate capital ultimately moved into dollar-denominated digital assets.

Pedro Fontes, a research analyst at Mercado Bitcoin, said the election demonstrated the importance of reducing dependence on the real when exchange-rate pressures intensified. He identified USDT and USDC as instruments allowing investors to obtain dollar exposure around the clock, including through comparatively small transactions.

Stablecoins are cryptocurrencies designed to maintain a relatively constant value against reference assets, typically the US dollar. Their availability throughout weekends and public holidays distinguishes them from conventional foreign-exchange markets, although their stability depends on issuer arrangements, reserves and market liquidity.

Brazil’s presidential contest heightened investor concerns over fiscal policy. Lula’s proposals for increased social spending and restrictions on online betting raised questions about government revenue, public borrowing and the administration’s ability to contain budgetary pressures.

Market expectations had favoured Bolsonaro before the runoff. His defeat prompted an abrupt reassessment of Brazilian assets, contributing to selling pressure when domestic equity and foreign-exchange markets reopened following Sunday’s vote.

The election outcome nevertheless reflected voters’ preferences rather than financial-market expectations. The subsequent market reaction demonstrated investor concerns about fiscal policy, without establishing that the government’s proposed measures would necessarily produce the anticipated deterioration.

Corporate demand for stablecoins also highlighted the distinction between cryptocurrency speculation and treasury management. Dollar-linked tokens provide exposure to foreign currency movements without requiring investors to take the same direct price risk associated with bitcoin, although they introduce separate custody, counterparty and redemption risks.

Mercado Bitcoin’s figures did not identify individual corporate customers or disclose the absolute value of election-day transactions on its platform. Consequently, the scale of permanent changes to corporate treasury allocations remains uncertain.

The exchange indicated that some corporate clients maintain up to 15% of their assets through its services, providing an indication of existing business participation in digital-asset markets.

Retail customers, meanwhile, represented 22% of Mercado Bitcoin’s total election-day trading, despite the exceptionally sharp increases recorded across its cryptocurrency markets.