Brazilian Companies Piled Into Stablecoins as Election Roiled the Real

The bill came due Monday. Brazil's benchmark Ibovespa stock index cratered 14%, its ugliest session since March 2020, while the dollar leapt more than 8% against the real, the currency's biggest one-day move since 1999. Crypto desks got one more session of feverish activity: combined USDT and USDC turnover hit 1.84 billion reais, about $350 million, 65% above the prior week, and bitcoin trading climbed more than ninefold to 1,336 BTC.

Sunday itself was the tell. On crypto exchange Mercado Bitcoin, corporate accounts generated 78% of all trading volume as companies scrambled to shield their treasuries while votes were counted. Turnover in Tether's dollar-pegged USDT jumped almost 800% from the week before and ran more than triple the average of the four prior Sundays, while bitcoin trading surged 865% versus the previous Sunday.

The panic had a policy behind it. Lula's platform of heavier social spending and a ban on online betting, which would drain tax revenue, fed fears that Brazil's finances would buckle under a win, adding pressure on the real and keeping borrowing costs elevated. Pedro Fontes, a research analyst at Mercado Bitcoin, wrote in an analysis shared with CoinDesk that higher exchange-rate pressure makes stablecoins like USDT and USDC a straightforward way to dollarize part of a portfolio, at any hour and from small amounts. He added that a stronger opposition in Congress could further complicate fixing the fiscal hole.

The flight wasn't confined to one venue. Biscoint, which tracks prices and volume across 10 platforms including Binance and Mercado Bitcoin, recorded a 150% week-over-week jump in USDT turnover against the real and a 318% spike for USDC. On Binance, bitcoin volume against the real rose 370% while the global BTC/USDT pair slipped 25%. Bitcoin itself gained 9.4% against the real yet dipped 0.2% against USDT, a clear signature of Brazil's currency being repriced.

Rewind three weeks and the mood was the opposite. When Flávio Bolsonaro finished ahead of Lula in the first round, the Ibovespa popped 7.7% and the dollar weakened more than 4% against the real as traders bet on a government change and tighter spending. Lula's runoff victory made him the first presidential candidate in Brazil's modern democracy to win after placing second, and companies stayed defensive: corporate clients are known to hold as much as 15% of their assets on Mercado Bitcoin, and retail users accounted for only 22% of Sunday's volume.

Prediction markets missed the swing. In an Oct. 24 preview, Kalshi priced Bolsonaro's chances at 84% even as its own writeup described polling as razor thin, according to CoinDesk. Both Kalshi and Polymarket have been blocked in Brazil since April. Einar Knobel, CEO and co-founder of sports data firm TxODDS, told CoinDesk the markets were trading the first-round result, poll headlines and the narrative around them, adding: 'I would not read this as a failure of prediction markets.'