Low interest era sparked illusion about bitcoins, says André Esteves

For André Esteves, chairman of the board of directors and senior partner at BTG Pactual, the low interest rates practiced in major global economies since mid-2007 have created distortions in asset prices in the financial market and in the perception of part of investors regarding the good diversification of investment portfolios.

According to the executive, in the last 15 years, the market has lived with a “bull market” environment [períodos de forte alta dos ativos de risco]which coincided with negative real interest rates in developed market economies.

“This inflated the prices of many financial assets and created several theses from the point of view of portfolio diversification that do not necessarily prove to be true when there is a reversal of the scenario”, said Esteves, during an event promoted by BTG Pactual this Tuesday (21). ).

The main name at the head of the financial institution also said that, in the wake of the era of low interest rates since practically the real estate crisis in the United States, theses have been developed about the potential of cryptocurrencies, with some market agents even defending that Bitcoin it was as safe an option for wallets as gold.

However, with rising inflation and interest rates in developed markets, and the strong correction of the American technology exchange Nasdaq, Bitcoin fell even more than stocks, Esteves pointed out.

Nasdaq accumulates 31% depreciation in the accumulated of 2022, until June 17, while the most popular of cryptocurrencies retreats 55%. Gold is up about 0.5% in the range. Bitcoin “is nothing ‘digital gold’ [ouro digital]”, said the chairman of the board of directors of BTG Pactual, who was reappointed at the end of April, after being dismissed in the midst of a serious crisis that hit the bank.

Esteves also said that inflationary pressure on a global scale, which had not been seen since the 1970s, a reflection of governments’ responses to the pandemic and, more recently, to the Ukrainian War, made the main Central Banks in the market “a little behind the curve”, having to accelerate the pace of interest rate hikes to contain the rise in prices.

Last week, the Federal Reserve (Fed, Central Bank of the United States) raised the American interest rate by 0.75 percentage point, the highest increase since 1994.

“In the case of Brazil, the Central Bank is far ahead of other central banks,” added the executive. On the same day as the interest rate hike by the Fed, the Brazilian Central Bank promoted the 11th consecutive increase in the Selic rate, to 13.25% per year, the highest level since the beginning of 2017.

The readjustment of the cost of capital amid the normalization of monetary policies is “almost invariably a little painful”, stated Esteves, who made reference to the volatility of the prices of financial assets, as had not been seen for some time, pointed out. “The scenario is quite adverse, and confronts the theory of management and portfolio diversification that has been built over the last 15 festive years.”