Whilst a new face has entered Number 10 Downing Street, uncertainty surrounding the future relationship between the UK and the EU remains. According to DailyFX, sterling weakened ahead of the result with GBPUSD touching a low of 1.2417 before pushing back to around 1.2450. The British Pound is expected to remain under pressure against a range of currencies in the near-term, especially if the new PM ratchets up the No-Deal rhetoric. However, any placatory commentary from either the UK or the EU, especially over the contentious Irish backstop, could see Sterling regain recent losses and push back above 1.2600 in quickly.
Back in May when Theresa May signalled her intention to resign as Prime Minister there was a direct impact on the value of the pound, which lost 3% of its value. Upon the Theresa May’s resignation, the pound dropped to 1.26 levels against the dollar (-0.20%) and 1.13 against the euro (-0.50%) whereas cryptocurrencies like Bitcoin appear to be untouched. With the announcement of Boris Johnson as Theresa May’s successor, there has been little fluctuation of the pound’s value.
Ana Bencic, Founder and CEO of NextHash, pointed out that cryptocurrencies like Bitcoin are attractive to investors who are searching for a more stable alternative in a post-Brexit Britain: “The pound and euro have fluctuated in value in correlation with major political events happening within the EU and the UK. Traditional currencies, by their nature of being linked to a central bank, can be influenced by the political situation within the country.”
As such, the question now is: could Johnson’s premiership ultimately have fatal consequences for the pound? For investors and internationally facing businesses, this could have huge implications. One solution could be diversifying currency trading options and utilising the benefits of cryptocurrency. For example, Bitcoin’s value was recently valued at $8000, after a period of sustained growth, despite a year that has seen the pound lose value, and could lose more yet. Investors who have been paying close attention to the near-constant rise in the value of several cryptocurrencies will be looking at what makes cryptocurrency a viable alternative to traditional currency.
“Bitcoin and other cryptocurrencies are a radical departure from the traditional financial systems and are better at storing value than any fiat currency,” Ana continued. “Because of the fixed and established inflation rates & supply sources of cryptocurrencies, they are not subject to the same inflation has been witnessed with traditional currencies. The inherent volatility of crypto can be beneficial for traders and businesses looking to tokenise assets.”
With the announcement of Boris Johnson’s succession to the office of Prime Minister, there is still a serious question looming over everyone regarding his approach to negotiations with the EU. “If a no-deal Brexit is indeed what occurs on the 31st of October, the pound will be vulnerable to the volatility of the market. The opportunities for growth within the crypto market are vast and more and more investors and traders will begin to look at these markets as an alternative to fiat currencies in the coming years,” the expert concluded.
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