Taking A Pounding

The UK economy is not doing a sterling job. On the back of a pandemic and an energy crisis, the new government thought they had the answers. But in a pound-for-pound battle with the U.S. dollar, they are down bad, and some folks are turning to Bitcoin:

• The pound and the Euro have recently hit all-time lows against the U.S. dollar.
• Although the dollar is doing well against a basket of other countries, the pound took a tumble after Kwasi Kwarteng unveiled historic tax cuts.
• Dubbed the “Kamikwasi budget” by some, the new Chancellor of the Exchequer has since taken a U-turn on some of the measures.
• However, in the intervening period, British traders took decisive action, by buying Bitcoin.
• Trading volume of the BTCGBP pair soared to an all-time high in the last week of September.
• Most of this is thought to be caused by market makers reducing their exposure, but also opportunistic investors looking for a good deal.
• Interestingly, this led to an arbitrage opportunity on Bitfinex. Most of the volume growth was seen there due to a “prolonged structural mispricing” compared to the dollar pair.

A similar period of volatility and an ATH against the dollar was seen with the Ruble when the Russian invasion started. The question remains as to whether the pound will be able to bounce back as fast.