The pound’s collapse against the dollar has coincided with a resurgent crypto market that has seen the price of bitcoin shoot up by more than 10 per cent in recent days, leading some market commentators to suggest that the fiat currency’s weakness was helping drive up the price of the cryptocurrency.
The world’s most valuable cryptocurrency has been remarkably stable over the last few weeks despite broader economic turmoil, trading within a relatively narrow band between $18,300 and $20,000 before reaching a high of $20,338 on Tuesday, according to CoinMarketCap’s price index.
Compared to the high rates of GBP inflation and a declining value against the dollar, bitcoin has a fixed supply that is designed to be deflationary over the long term.
The price volatility that typically accompanies bitcoin and other cryptocurrencies also appears to have stabilised in recent weeks and months.
“You know we’ve reached a unique time in history when bitcoin suddenly is less volatile than fiat currencies,” said Sven Henrich, founder of markets research firm Northman Trader.
The latest bitcoin price surge came just hours after the pound hit an all-time low against the dollar in the wake of the tax-cutting mini-Budget announcement by Chancellor of the Exchequer Kwasi Kwarteng.
“We are confident in our long-term strategy to drive economic growth through tax cuts and supply-side reform,” Mr Kwarteng said in a meeting on Tuesday with representatives of the Financial Services industry.
“I’m confident that with our growth plan and the upcoming medium-term fiscal plan – with close cooperation with the Bank [of England] – our approach will work.”
Writing for Cointelegraph, crypto analyst Marcel Pechman suggested the plummeting price of the pound “could be a game-changer” for cryptocurrencies.
He wrote: “Once the general population realises their savings and investments are being devalued more aggressively by central bank stimulus measures, the benefits of a decentralized form of money could become clear.”