The Central Bank of Brazil may have lost around R$72 million when investing in gold to increase Brazil’s financial reserves instead of having bought Bitcoin (BTC).
Recently BC announced the purchase of 41.8 tonnes of gold in June, with the purchase, the volume of gold that is part of the reserves jumped 52.7% in just one month, to 121.1 tons, equivalent to US$ 6.873 billion.
However, although the BC has not disclosed the amount spent on the purchase or even the date of acquisition, from June to August the price of gold fell by about 2.3%.
Estimates made by Cointelegraph indicate that BC may have spent up to $3,622 billion on the acquisition of the precious metal and, with the drop of just over 2%, it would have ‘lost’ around US$72 million with the devaluation.
However, if it had used the amount to buy Bitcoin, the Central Bank would have about 17,713 BTCs purchased at an average value of R$ 204,000, the cryptocurrency price in June.
Thus, if BC had used Bitcoin as a store of value instead of gold, would have ‘profited’ just over US$99 million as BTC, unlike gold, rose 15% in the period.
Furthermore, if BC had bought Bitcoin instead of gold, it would have reduced the distance between its reserves and the amount blocked in ETH 2.0
Ethereum volume blocked for transaction validation in Ethereum 2.0 trial version it exceeds 3 times Brazil’s gold reserves held by the Central Bank.
At the time of writing the total value in blocked Ethereum represents about US$21,425,646,605.22, more than three times the amount of gold reserves held by the BC estimated at US$6,873 billion.
central bank buy bitcoin
So far, no central bank in the world has reserves in Bitcoin, but this is a matter of time according to Alex Krüger, economist and founder of Aike Capital.
Krüger argues that the demand for gold by BC is constant, however the metal is not suitable as a store of value in times of digital economy.
I’ve changed my mind.
Major Central Banks Will Eventually Hold # Bitcoin as to reserve asset.
So let’s explore how central banks’ gold demand looks like 👇
— Alex Krüger (@krugermacro) January 1, 2021
In Brazil, a proposal for a Bill was recently sent to the Federal Senate of Brazil, through a Legislative Idea, asking the BC to buy Bitcoin as a store of value.
The proposal, published on the Senate’s legislative portal, was presented by a resident of the State of Bahia named Gustavo Gomes and would be inspired by the El Salvador bill, which adopted the BTC as its legal currency. The text says:
“Given the technological advances it is necessary for our country to acquire at least 5%~10% of the total supply of Bitcoin. Next world currency used as a store of value by countries
If the project is discussed and sanctioned, the investment from the country’s current reserves would reach up to R$ 387 billion, despite the legislative idea not pointing out the source of the purchase.
Each legislative idea sent to the Senate needs 20,000 statements of support to then be forwarded to the Commission on Human Rights and Participatory Legislation, which will be able to debate the issue.
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