With a ‘no deal’ Brexit fast becoming the most likely option, experts believe it could put a rocket under the Bitcoin price on October 31.
The UK has been “negotiating” its exit from the European Union for two years now, but following the election of chief Brexiteer Boris Johnson a ‘no deal’ Brexit appears to be the most likely eventuality.
That’s where the UK leaves Europe without a deal on tariffs and trade which could cause economic turmoil both for Britain and the rest of Europe.
It’s due to occur on October 31 unless its opponents can figure out how to prevent it.
The British Pound has slumped to its lowest levels in a decade due to fears over Brexit.
Bitcoin could be the big winner
But could it prove a boon for the Bitcoin price? Financial experts have increasingly begun to view Bitcoin as an uncorrelated safe haven asset that benefits from economic uncertainty, such as the US-China trade war.
Anecdotal evidence suggests Venezuelans have increasingly been mining and using Bitcoin as a result of hyperinflation of the bolivar, and Turkish people have demonstrated an outsized fascination with BTC thanks to rising interest rates and a struggling economy.
While many pundits believe that fears of a hit to the UK economy from Brexit have been exaggerated Carolyn Fairbairn the director-general of the Confederation of British Industry wrote in the Financial Times recently that, “No deal is a tripwire into economic chaos that could harm our country, and the EU, for years to come.”
And the host of the Keiser Report Max Keiser tweeted that he’d predicted the Brexit/Bitcoin connection two years ago: ‘Population about to go nuts. Panic in the air. Capital flight threatens to destroy banks. Protect yourself with Bitcoin’.
Evidence of a connection
There are some reasons to suspect a connection. Over the past three months, Bitcoin’s correlation to Gold prices has doubled.
Searches for Bitcoin rose dramatically to their highest levels in a year in the days following Boris Johnson becoming Prime Minister.
Some cryptocurrency experts have gone on record to say that Bitcoin will benefit enormously from the economic turmoil caused by a ‘no deal’ Brexit
“Bitcoin has rediscovered its mojo this year with multiple mini surges but a no-deal Brexit could see a massive and unprecedented breakout,” Nicholas Gregory, CEO of blockchain firm CommerceBlock said.
“Not only will a no-deal departure from the EU create turmoil and volatility across two major fiat currencies, it will also trigger an identity crisis for the global system as the contingency and vulnerability of major global fiat currencies is laid bare.”
He believes a no-deal Brexit could push Bitcoin past the $20,000 mark to set a new all-time high.
Fiat money is shooting itself in the foot
Gregory said that measures central banks were taking to combat economic uncertainty – such as money printing and negative interest rates – will also bolster the case for Bitcoin.
“If central banks revert to ramping up the money printing all over again, the case for cryptocurrencies like bitcoin whose supply is capped will be further reinforced.
“Each time a central bank increases the money supply, it’s another nail in the coffin of fiat.”
Nigel Green, CEO of deVere Group has likened Bitcoin to ‘digital gold’ and said it was a “flight-to-safety asset during times of market uncertainty”.
He believes a no-deal Brexit would allow Britain to set up its own crypto-friendly laws and regulations that will enable the country to benefit from blockchain adoption.
Gold, digital gold
eToro analyst Simon Peters said that investors had traditionally turned to Gold during periods of economic uncertainty (and they still are, given Gold’s record-breaking bull run this year).
“Yet Bitcoin also seems to have served a similar purpose. Given that Chinese investors make up a large proportion of crypto investors, there’s a strong possibility some are backing Bitcoin’s chances against the yuan,” he said.
Jeremy Allaire, CEO of Circle, told CNBC recently that Bitcoin’s finite supply and decentralized infrastructure made it an attractive investment.
“You can very clearly see some macro correlation there,” he said. “Rising nationalism, rising amounts of currency conflict, trade wars, these all obviously are supportive of a non-sovereign, highly secure digital store of value.”
Bitcoin has a long way to go in the UK
While Bitcoin proponents are talking up the cryptocurrency’s prospects, it has a long way to go before it reaches mass adoption in Britain,
Research from the UK Financial Conduct Authority (FCA) found that only 30% of Britons even know what cryptocurrencies are, while just 3% had ever purchased them.
And only 7% of those surveyed indicated they are open to doing so in future.