While Brexit referendum decision by the UK voters has seen the pound touch historic lows and almost all the global markets running into negative, one derivative of the markets that has gained from the decision apart from gold is Bitcoin.
Surging as much as 13 percent as the decision by the UK voters to leave EU fueled demand for alternative assets, Bitcoin was one of the few winners out of the U.K.’s vote to leave the European Union.
According to data compiled by Bloomberg, the digital currency jumped 11 percent to $681.68 as of 1:45 p.m. Hong Kong time on Friday. In contrast to situations earlier this week, as bookmakers’ odds projected victory for the campaign to keep Britain in the EU, and ether, another cryptocurrency, declined after a reported hack, the price of bitcoin had plunged 20 percent in the four days through Wednesday.
The UK Brexit referendum resulted in sinking equities to emerging-market currencies, Bitcoin rallied along with gold and the yen as the referendum result took markets by surprise. Peter Rosenstreich, head of market strategy at Swissquote Bank SA said that Friday’s selloff could spur further action from monetary authorities and some buyers may prefer the digital asset because it isn’t influenced by central bank policy.
“Bitcoin has been trading alongside the U.K. referendum. I don’t think it is a traditional safe-haven trade but a strategy to avoid perceived official manipulation,” Rosenstreich said by instant message from Gland, Switzerland.
As a way to gain freedom from the influence of central banks and financial institutions was what had prompted the early bitcoin adopters to envision the currency thus. At present the total global supply of bitcoin is capped at 21 million.
Weeks before the Brexit referendum, the price of bitcoin surged to levels not seen since the beginning of 2014 riding on fears expressed by several surveys that UK would opt out of the EU. However earlier this week as the fear of Brexit became less apparent and the polls began suggestion lesser possibilities of a UK pull out from the EU, the price of the cryptocurrency plummet by over $100 in the space of just five hours.
There have been unprecedented swings the value of the world’s most-used cryptocurrency in the last one month despite the consideration that the price of bitcoin has always been volatile. The volatility is evident from the rise and fall of the price of bitcoin. The price soared to touch a two-year high of $775 last Saturday from from $450 on May 26 and again it fell back down to $550 Thursday.
The market cap of bitcoin has also mirrored the fluctuation and volatility. Over the same period as mentioned above for the price of bitcoin, the market cap for the cryptocurrency has gone from under $7 billion to almost $12 billion and back to just above $9 billion.
There are a couple of issues that seem to be driving the price higher, and subsequently lower, over the past month. Despite the fact that the price roller coaster can’t be pinned to any single factor, the U.K. referendum on membership of the European Union is believed to be the key among them.
(Adapted from CNBC & IBTimes.com)