Global markets have been severely impacted by macroeconomic factors, including rising inflation and fiscal instability. Bitcoin has often followed financial movements, but its impressive performance over the previous week has surprised some traders and highlighted the unsettling times.
The British pound (GBP) and Chinese yuan are among the currencies that are falling, but Bitcoin has defied the trend, rising 6.3% over the last seven days and edging closer to $20,000. Bitcoin has been more volatile than important foreign currencies, but it is historic that in the last seven days things have been the other way around.
The new policies of UK Prime Minister Liz Truss, who was recently elected, have been generally credited with the decline in the value of the British pound. At a time when the UK is experiencing its highest inflation levels ever—standing at 9.870% for the month of August—she has introduced significant tax reliefs. As a result, the pound has continued to decline after already beginning to decline when the UK opted to leave the European Union.
The British pound is down 12% since Bank of England Governor said “be prepared to lose all your money in Bitcoin and crypto.”
With reference to the recent volatility in their currency, UK Labour party member and member of parliament Angela Rayner tweeted that the British pound isn’t Bitcoin in an effort to tease the ruling party. Similar to the Euro, the GBP is currently trading very near parity with the US dollar. In fact, there was a period when the Euro and US dollar traded at par. On the other side, while the Fed keeps raising interest rates, the greenback is strengthening.
Other currencies like the Chinese Yuan have also seen a decline as the government there imposed stringent measures during covid and the country is also facing a real estate crisis waiting to collapse.
Despite the fact that Bitcoin has been pitched as a hedge against inflation, its connection to American markets shows that it is having a growing impact on banking activities. In September, Bitcoin experienced its own choppy trading, surging at the start of the month before falling significantly in the middle of the month after higher-than-anticipated reports of inflation in the U.S.
Most of the time, bitcoin has moved similarly to risky assets like tech stocks. With Bitcoin marginally in the black for the month, while the tech-heavy Nasdaq is down almost 10%, its rise over the past week has been something of an abnormality.