The scale of the turmoil in the City’s foreign exchange market caused by the September mini-Budget was laid bare today after new data found sterling’s volatility sparked a ten-fold increase in the volume of pound to Bitcoin traffic on spot exchanges.
A staggering £6 billion worth of Bitcoin-pound trading took place in the days following the Budget, according to cryptocurrency hedge fund Tyr Capital, as investors retreated from the plunging pound to the relative stability of the digital coin, which for the first time was considered a “safe haven” compared to Sterling.
Ed Hindi, Chief Investment Officer at Tyr Capital, told the Standard: “These numbers are significant and they are something we haven’t seen in developed countries in the past.
“We have only seen it in developing countries’ currencies like with the Turkish Lira. It gives you an idea of how much distrust there has been in the fiscal policies of the new government.”
Last month, sterling crashed to its lowest level against the dollar since decimalisation in 1971, dropping to just $1.03 before regaining ground to $1.12 in the days following chancellor Jeremy Hunt’s decision to reverse a number of Liz Truss’s tax cut pledges. The 10% plunge in value is significantly greater than the volatility of Bitcoin, which hasn’t fallen by more than 5% over the same period.
It comes as new data shows the UK has become Europe’s biggest crypto trading market and the sixth-biggest worldwide in the past year, with some $233 billion worth of cryptocurrency transacted in the year to June 2022.
While other European economies saw a decline in crypto activity, Britain’s market was the only top-five Western European country that grew over the period in terms of the number of on-chain transactions its citizens engaged in each quarter, according to New York-based blockchain firm Chainalysis.
Chainalysis director of research Kim Grauer said: “The interesting thing about the UK is it’s got one of the biggest crypto markets in Europe.
“Since the start of the year there’s been a bear market but the UK ended the past twelve months ahead of where it was…some people do view Bitcoin as a safe haven in a market where there is extreme financial risk.”