Has Brexit contributed to the rise of cryptocurrency in the UK? Whilst the traditional currency markets react to Brexit implications and related financial news, Bitcoin and Ethereum skyrocketed in price.
The correlation between Brexit and the rise of cryptocurrency
The United Kingdom’s vote to leave the European Union shocked the global currency markets. Following the 23 June 2016 referendum, the value of sterling fell to a 31-year low. Almost overnight the pound dropped around 10 percent against the dollar, as traders and investors reacted to the economic uncertainty following the result.
As the ‘leave’ win sent global equity markets tumbling, stunned investors attempted to safeguard against the implications, by seeking shelter in the so-called safe-haven assets, including gold, government bonds, and certain currencies. Gold, in particular, hit a 2 year high following the vote, rallying as much as 21% in early trade.
The current state of affairs
With Brexit negotiations now well on their way, Theresa May has opted for a “hard Brexit” deal, which means that Britain will also be exiting the single market. This means huge financial implications and even more uncertainty for the global markets.
A year ago, around the time of the referendum in June, one bitcoin could be bought for $650 (or around £500). Today, as measured by the CoinDesk price index, to purchase one bitcoin you would need $2,610 (or around £2,040). This represents an annual increase of around 210%.
Moreover, at the beginning of this month, the price of bitcoin reached an all-time historical high when it broke the $3,000 psychological barrier on the CoinDesk price index. Even, following the market correction bitcoin is steadily trading at between $2,600-$2,900 per coin.
Alternative digital currencies are also seeing a lot of growth, with the Ethereum token setting its own all-time high record of reaching more than $300 this month.
Post-Brexit expectations for cryptocurrency
These recent developments are bringing fresh investor attention to the potential of bitcoin and other cryptocurrencies, with a more optimistic expectation than ever before. Despite its volatility, bitcoin seems to be offering a small escape route for those who do not wish to be caught up in the financial turmoil of the traditional currency, and with inflation on the rise in the UK, the benefits are starting to outweigh the risks even for the more conservative investors. Although mainstream investors will always jump on safe-haven assets, gold in particular, during times of hyper-volatility, bitcoin is now a clear and promising alternative. Furthermore, there is still untapped potential. Last December, the Danish Saxo Bank published a forecast report placing a possible value of bitcoin at $100,000 in the next 10 years. This so-called “Outrageous Predictions” forecast was made when bitcoin was trading at around $754. More recently, in an interview with CNBC, Saxo Bank analyst Kay Van-Petersen, predicted that in 10 years the market capitalisation could reach $1.75 trillion, making each bitcoin worth $100,000.
It appears, that Brexit and the related financial trends, could fuel a more widespread adoption and integration of digital currencies and boost their growth even further in the foreseeable future, in the UK and globally.
Disclaimer: This article is for information and entertainment purposes only and should never be construed as investment or trading advice. Bitcoin and other cryptocurrencies can be extremely volatile and you should always do your due diligence and research on the topic, utility, product or service and legal and regulatory requirements before deciding to invest. We do not take any responsibility for possible losses you may incur.