Is it time for Bitcoin to shine?British pound hits all-time low against dollar

The British pound hit a record low against the US dollar on Sept. 26 after tax cuts and further debt increases were announced to limit the impact of the recession. This volatility simply reflects investors’ doubts about the government’s ability to sustain rising costs of living across the region.

The US dollar is the clear winner as investors seek refuge in the largest global economy, but the weakness of the British pound could be a net positive for Bitcoin. It is the oldest currency in the world still in use today and has been in continuous use since its inception.

Fiat currency is a 52-year-old experiment

As we know it today, the British pound began its journey in 1971 after its convertibility to gold or its equivalents had effectively ended. Since then, no currency issued by the Bank of England has had a fixed value.

Inflation has been the center of economic debate throughout 2022 after central banks added liquidity to markets over the past two years to stimulate the economy. As a result, in August 2022, UK consumer prices were up 9.9% year-on-year.

On September 22, the government announced an unprecedented tax cut. This was his highest since 1972, and the British pound hit an intraday low of $1.038 against the US dollar on 26 September. We need to lower tax rates and aggressively raise interest rates.

The GBP loss of value is shocking, but we need to analyze exactly how important global currency markets are and how much the British Pound is related to cryptocurrencies. The first part is relatively easy to answer, but it depends on whether bank deposits, savings and certificates of deposit are considered. Sticking to the definition of base money and measuring only cash and deposits in circulation at the central bank, Pound Sterling said he would be £1.5 trillion in June 2022.

When converted to US dollars, the UK currency represents $1.11 trillion of the world’s $28.2 trillion legal base money, or about 4%. Meanwhile, the euro, the single currency of the euro zone countries, leads the rankings with $6 trillion, followed closely by the US dollar with $5.5 trillion. The importance of the GBP is therefore still high, with the region’s gross domestic product in 2021 being the fifth largest in the world, underpinned by his $3.19 trillion.

In October 1990, the UK government decided to pair GBPs based on the Deutsche Mark. However, the UK was forced out of the pairing in September 1992 as its exchange rate became unsustainable due to its lackluster financial performance. As a result, interest rates surged from 10% to 15% during ‘Black Wednesday’ and the GBP currency was devalued by 25% overnight.

Related: GBP follows Euro.Pound-dollar exchange rate hits all-time low

Supply caps and scarcity could give cryptocurrencies a chance to shine

Few assets can compete with fiat currency in terms of relevance. Excluding jewelery and non-financial assets, gold is valued at around $6 trillion and is definitely a strong contender. Tech giant Apple also leads the stock market valuation with a market capitalization of $2.45 trillion, followed by $2 trillion oil producer Saudi Aramco.

It’s not easy to extrapolate the British pound’s relevance to cryptocurrencies, but according to data from Nomics, the US dollar is the absolute leader at 89% of global bitcoin fiat trading, followed by the Japanese yen. are 4% and 3%. Euro 2%, Sterling 2%.

As a result, while the direct impact on bitcoin trading appears to be relatively small, the fact that the oldest fiat currency hit an all-time low against the US dollar could prove to be a game-changer for cryptocurrencies. I have.

According to Porkopolis Economics, the average issuance rate of the pound since 1970 has been 11.2% per annum. This figure can be directly compared to 900 coins daily or 1.7% bitcoin issuance per year.

The benefits of a decentralized currency could become apparent once the public finds savings and investment more aggressively devalued by central bank stimulus. But for now, the US dollar is the clear winner, reaching its highest level in more than 20 years compared to other major global fiat currencies.