Brazil Embraces Cryptocurrencies: A New Love Story?
Sluggish Price Action – Holiday-Triggered Low Volatility or the Calm Before the Storm?
Bitcoin is officially a payment method in Brazil after President Jair Bolsonaro ratified Thursday a bill that establishes the regulatory framework for trading and using BTC. The bill became law with the President’s signature and will go into effect 180 days after its signing.
It has to be noted that the new law doesn’t make Bitcoin a legal tender in Brazil, so its status is different than in El Salvador. Instead, a virtual asset is “a digital representation of value that can be negotiated or transferred electronically and used for payments or as an investment,” according to the text of the law.
Even if BTC is not legal tender, the law has the potential to ignite huge crypto activity in Brazil. However, the extent of its adoption will depend on the Central Bank of Brazil (BCB), which will be the probable regulator when it comes to payments made with Bitcoin. When it comes to investments, Brazil’s Securities and Exchange Commission will be the watchdog.
With this in mind, we cannot disregard the potential conflict of interest between a central bank and crypto being used as payment. Surely the central bank will push its own currency rather than a digital one. And on top of this, the Central Bank of Brazil is expected to launch its digital coin, the Real Digital by 2024. Even more, BCB’s President Roberto Campos Neto has mentioned numerous times that in his view, the volatility of crypto assets prevents them to be a viable alternative to fiat currencies.
Technical Outlook – BTC/USD
It’s true that cryptocurrencies are volatile assets but lately that hasn’t been the case. After the bounce at $18,250, Bitcoin returned below $17,000 and traded flat for the last few days. In fact, the pair has been trapped in a tight range since the FTX chaos that plunged Bitcoin into the $15,600 area.
Currently, the pair is stuck like a magnet below $17,000 and volatility is extremely low. This could be due to the Winter Holidays but it could also mean that a strong move is in the making. A break of $17,000 would need a hefty bullish impulse, considering that the 50-day Moving Average is also very close.
The RSI is trading in the middle of its range, without clear direction and without showing any significant divergence, which makes it that much harder to anticipate the next move. It would be probably best to wait for a clear break or bounce before entering the market. In the meantime, we wish you Happy Winter Holidays and a Happy Christmas to those of you who celebrate it!
