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Bitcoin spreading wings in Brazil despite bad reputation
According to recent data published by BitPay, the volume of bitcoin transactions in Latin America has soared by 120 percent and in quarterly transactions it has grown twofold. Analysts say that high rate of inflation and shaky economic conditions of Argentina and Brazil have led to the surge in the bitcoin business in the Latin American region.
Daniel Novy, BaseBit founder, said that although the aforesaid reason may well provide a logical explanation for Argentina, which faces an annual inflation rate of 28.2 percent and where a major chunk of population is ready to shell out 20 percent above the prevailing rates to get hold of U.S. dollars, the rise in inflation (which at present stands at 9.56 percent) and bitcoin growth in Brazil is completely coincidental.
Speaking to Bitcoin Magazine Novy said, "When inflation is high, everyone buys government bonds. They are offering about 14 percent a year. It's a very good deal comparable to the most profitable hedge funds you can find in America. It doesn't make much sense to use bitcoin to protect yourself against a 9.6 percent inflation per year when the bitcoin volatility is about 50-plus percent per year. I mean, you don't use a more volatile asset to protect yourself against a less volatile one. And having the option to protect yourself using government bonds, which offers a premium over the inflation, makes the use of bitcoin less attractive yet."
Despite high inflation and poor state of Brazil's economic health, the number of bitcoin businesses has grown considerably over the past few months. bitValor.com recently stated that volume of monthly bitcoin transactions in all Brazil-based bitcoin exchanges stood at 10,000 BTC, approximately $2.8 million.
Novy added that the number of bitcoin merchants in the e-commerce industry has increased, "but it's definitely not related to inflation... Bitcoin has a bad reputation here, but anyway the merchants are definitely being more opened to it..The bad reputation is mostly due to the bad news that arrives here. Like bitcoin being used by money laundering, kidnapping with rescue paid in bitcoin, exchanges closing their doors and running away with bitcoins from its clients, things like that."
He further said that even though Brazil is witnessing high volume of monthly bitcoin transactions, not a lot of people in the country are even aware of bitcoin.
Citing probable reasons for this he said, "I see a lot of reasons for that but the principals are: a) complete lack of seed capital and venture capitalists. If you can receive 14 percent per year return doing... nothing, it doesn't make sense to risk your money! b) lack of incentives from government for startups."