If we measure any asset in the Argentine Peso, it will probably be at the historic high, after all, the porteño currency has devalued 94% in the last 10 years. With the Brazilian Real the situation is not so different, since it has lost 60% in the last 9 years against the Dollar.
Gafisa's shares, when measured in Brazilian currency, yielded 70% in the period above. However, when analyzing the graph in a weaker currency, the effect disappears.
For Bovespa's price to remain at the same level in Dollar over the last 9 years, it would have to have risen 250%. You didn't read it wrong!
We will then kill your curiosity and display the Ibovespa chart, the main indicator of shares in Brazil, but measured in dollars:
There is no trick, we are actually 36% below the peak of May / 2008. All this euphoria and celebration vanishes when comparing with Bitcoin returns in either 12 months or 3 years:
Much of this is because Bitcoin has well-controlled inflation (actually a new currency issuance schedule). Within a few months this rate will drop to 1.8% per year. That is, very close to the current level of gold extraction.
While Bitcoin has a strict timetable for creating new currencies that is halved every 4 years through the process called halving, gold production can easily be tripled in the event of an increase in its price.
That is, while a price increase makes gold mines viable that were previously disabled due to the cost of exploration viable, in Bitcoin this is not possible. Even if the number of miners doubles in a week, the number of Bitcoins produced in the year is stable.
What is Bovespa's secret?
Marketing and “Lindy effect”, That is, a great history of existence. How many youtubers, brokers and traditional investment advisers do you know? Every day we are bombarded with advertisements reminding that Magazine Luiza's shares rose 4,000% in whatever period.
There are more than 300 companies listed on the Bovespa, so the normal curve tells us that 4 or 5 of them will show a stratospheric return. What these analysts forget to comment on are the ones at the other end, including those from the former empire of Eike Batista, the bankrupt BR Pharma (BPHA3) in addition to the construction companies Viver Incorporadora (VIVR3), PDG Realty (PDGR3) and Gafisa (GFSA3 ), all 90% below the peak, and immersed in debt.
The next time someone tells you this story of “Bovespa in the historic maxim”, show him the graph side by side with Bitcoin.
About the author
Marcel Pechman served as a trader for 18 years at UBS, Deutsche and Safra. Since May 2017, he has been doing cryptocurrency arbitration and trading, as well as co-founder of the cryptocurrency analysis website RadarBTC.