Brazilian companies turned to stablecoins on election day to dodge a currency crash

Corporate accounts accounted for 78% of Mercado Bitcoin's trading volume on election day as companies aimed to hedge currency risk while traditional markets were closed.

Mercado Bitcoin reported that USDT volume increased by nearly 800% and bitcoin volume rose by 865% compared to the preceding Sunday.

The Ibovespa declined 14% on Monday, marking its worst day since March 2020, following incumbent Luiz Inácio Lula da Silva's victory over Flávio Bolsonaro, whom prediction markets had priced as approximately an 80% favorite.

Brazilian firms engaged in a crypto trading surge on Sunday to shield their treasuries from the election outcome, which saw Lula unexpectedly defeat Flávio Bolsonaro.

Pedro Fontes, a research analyst at Mercado Bitcoin, noted in an analysis shared with CoinDesk, "For investors, this reinforces the logic of not relying only on the real." He added, "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."

The surge was not limited to one exchange. Data from Biscoint, tracking 10 venues including Binance and MB, showed USDT turnover against the real grew 150% from the previous Sunday, and USDC volume jumped 318%.

By Monday, the combined USDT and USDC turnover reached 1.84 billion reais ($350 million), which was 65% higher than the prior week, while bitcoin trading surpassed 1,336 BTC, more than nine times the previous Monday's volume.

On Binance, BTC turnover against the real increased 370%, while the global BTC/USDT pair dropped 25%. Bitcoin gained 9.4% against the real but fell 0.2% against USDT, consistent with a repricing of Brazil's currency amid election reactions.

The market's initial reaction differed from the current one; three weeks prior, when Bolsonaro was ahead of Lula in the first round, the Ibovespa jumped 7.7% and the dollar weakened over 4% against the real.

In an October 24 preview, Kalshi put Bolsonaro's chances of winning at 84%, even while its article noted polling indicated a very close race. Einar Knobel, CEO and co-founder of TxODDS, stated in an emailed statement to CoinDesk, "[Prediction markets] were trading the first-round result, poll headlines and the story built around them."