Bitcoin (BTC) as a safe haven for the British?

Chute de la livre sterling : le Bitcoin (BTC) comme valeur refuge pour les britanniques ?

The price of the British pound has recently fallen, causing uncertainty for a large number of investors, some of whom seem to have chosen Bitcoin (BTC) as a safe haven. On September 26 in particular, trading volumes on the GBP/BTC pair literally exploded. What does this mean, and will it happen on a larger scale?

The pound fell to an all-time low

There were market combinations that very heavy impact on the British poundwhich face significant medium-term volatility risks and hit record lows last week: in 15 days, the pound fell 9%.

The GBP/USD exchange rate also reached its lowest peak on September 26, when it posted $1.0350 in the Asian session, reminiscent of the brief crash of 1985. For your information, in the last 40 years, the average value of the GBP differed only between $1.50 and $2.

The price of the GBP/USD pair from 1982 to today

Britain’s new prime minister, Liz Trusstherefore facing many uncertainties in the market and reassuring his friends, although they no longer seem to trust the measures taken by his government, as Fiona Cincotta pointed outanalysts at City Index:

β€œThe market’s reactions show that investors have lost confidence in the government’s approach, which has created a level of volatility that puts the pound on par with some emerging market pairs. Β»

As a result, some of the citizens of England seek to turn to another value, ie. and Bitcoin (BTC) seems to have emerged as a top choice. Indeed, as said James Butterfillthe research director at CoinShares, GBP/BTC trading volumes literally exploded.

GBP/BTC trade volume

GBP/BTC trade volume in dollars

Surprising information, the choice of this asset in contrast to gold, a metal that is still recognized as a benchmark for safe investmentswhich has significantly reduced interest from investors, as one analyst at Messari noted:

Dunleavy's Twitter

“‘Solid money in gold’ was devalued during the sell-off of the euro on 13 September and the fall of the pound on 26 September. Β»

Compared to the previous 30 days, trading volume on the GBP/BTC pair increased by 878.11%. If we compare this data with the data of the previous year, it represents a huge increase of about 1,431.76%.

In fact, the same day, the amount processed exceeded 881 million dollarsalthough the average for the latter is about 70 million dollars in the last two years.

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Beyond Bitcoin’s store of value

It should be noted, however, that the brutality with which the pound fell was unexpected and unusual, creating de facto arbitrage opportunities and price differences between the exchanges. For example, we can see a spike in trading volume when the discount BTC/GBP pair was steepest :


Arbitrage opportunities (top) versus recorded trade volumes (bottom)

However, this explanation only explains a marginal part of the trade volumes. as detailed in Messari’s report :

β€œAs these people in the UK and EU see the value of their currency falling, they are effectively selling the Pound and the Euro for Bitcoins. If this was just a trade to capture volatility, we would have seen similar spikes in May 2021 and certainly in March 2020.”

In short, there are investors massive dumping of their sterling and historical stores of value in favor of bitcoin. However, Bitcoin may not become a benchmark store of value for at least a few years, as Bitcoin still has a lot of work to do to gain wider acceptance. But this could be the first domino to fall in this direction.

And now ?

As the US dollar continues to prove its supremacy, as shown by the evolution of the DXY indexBritish and European markets are more than ever in a phase of great uncertainty, especially due to the huge inflation and the rise in energy prices, which is evident by comparison with the conflict between Russia and Ukraine which recently rose again.

Indeed, as The Block’s correlation matrix proves, Bitcoin and Ether (ETH) are closely linked to the evolution of financial markets. A correlation of 1 means a very strong relationship between the prices involved, a correlation of 0 means no relationship between 2 prices, and finally a correlation of -1 means an almost opposite evolution.

As shown in the table below, the 2 largest cryptocurrencies on the market are highly correlated with the main global financial market indices.

ETH BTC markets index

Correlations between Bitcoin, Ether and major market indices

for now, the course of the pound sterling has increased due to intervention by the Bank of England who had to make purchases on the bond market, which had a downward effect in the short term, but succeeded in restoring confidence – temporarily – to investors.

According to Kristalina Georgievathe director of the International Monetary Fund (IMF), Bank of England replied “ quickly and very appropriately “, in contrast to the alarming judgment of the IMF on the first plan proposed by the government of Liz Truss on September 23, which in particular mentioned. the richest people were taxed in the next two years up to 172 billion dollarsan idea that has since been abandoned.

Either way, the coming months should prove to us whether Bitcoin will be able to gain interest as a store of value among investors, given the current state of the international financial market, which must also address Credit Suisse’s bankruptcy risks.

πŸ‘‰ To read on the same topic – Bitcoin (BTC) outperforms the stock market in September

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Sources: TradingView, Capital, Arcane

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