As investors seek safety in the biggest global economy, the U.S. dollar has been the clear winner, but could the British pound‘s decline be good for Bitcoin?
Following the announcement of tax cuts and additional debt increases to lessen the effects of a potential economic recession on September 26, the British pound hit a record low against the U.S. dollar.
As investors seek safety in the biggest global economy, the U.S. dollar has been the clear winner. However, Bitcoin may benefit from the British pound’s decline.
The oldest currency that is still in use today is the GBP, or British pound, which has existed since its inception.
There has been a 52-year experiment with fiat money.
As a result, consumer prices in the United Kingdom rose 9.9 percent in August 2022 compared to the same month the previous year.The government announced the largest tax cut since 1972 on September 22, which led to the British pound falling to an intraday low of $1.038 against the US dollar on September 26. Analysts came to the conclusion that interest rates would need to be sharply raised and that government bond issuance would increase to cover the lower tax.
While the GBP’s value decline is shocking, it is important to consider how significant the global currency market is and how the British pound relates to cryptocurrencies. If we adhere to the base money definition, which only accounts for deposits at the central bank and circulating cash, the value of the pound sterling in June 2022 was GBP 1.05 trillion.
Out of the $28.2 trillion in global fiat base money, or $1.11 trillion in U.S. dollars, the U.K. currency accounts for about 4%, or roughly $1.11 trillion.
As a result, the exchange rate was no longer viable.
Fiat money is one of the few assets that can rival it in relevance.
Without including jewellery and nonfinancial assets, gold has a value of about $6 trillion and is a strong contender. With a capitalization of $2.45 trillion, the tech giant Apple also commands the stock market valuation. Saudi Aramco, the world’s largest oil producer, is next with a capitalization of $2 trillion.
The average annual issuance rate of the pound sterling since 1970 has been 11.2 percent, according to Porkopolis Economics.
This amount is directly comparable to the daily issuance of 900 coins, or 1.7 percent, for Bitcoin.
In contrast to other significant global fiat currencies, the U.S. dollar has emerged as the clear victor for the time being, rising to its highest level in more than 20 years. follow us