As a developed nation, you know your currency’s in a spot of bother when investors start to hedge with bitcoin.
After Britain’s brief Prime Minister Liz Truss unleashed her mini-budget on Sept. 23, filling financial markets with dread, a section of investors stampeded away from the pound and towards the cryptocurrency .
Trading volumes between bitcoin and the pound jumped 233% in September overall from the month before, according to data from research firm CryptoCompare, while trading between the cryptocurrency and a similarly battered euro also jumped 68%.
“It was the first time we’ve seen such a huge increase in (bitcoin) volumes for the currency of a developed country,” said Ed Hindi, chief investment officer at Tyr Capital.
On the Monday after the Friday budget shock, when the pound fell to its lowest-ever level against the dollar, trading volumes between sterling and bitcoin spiked to a daily record high of 846 million pounds ($955 million), according to market data firm Kaiko Research.
Meanwhile, bitcoin’s volatility is near the lowest it’s been all year. By contrast, volatility in safe-haven U.S. bonds is near its highest since March 2020, as measured by the ICE BofAML U.S. Bond Market Option Volatility Estimate Index (.MOVE).
In fact, over the past month of market ructions, U.S. Treasuries have been equally or more volatile than bitcoin, according to Refinitiv data. Both bitcoin and the U.S. 10-year note are now hovering at around 21, according to a measure of realized volatility, while at the start of September bitcoin volatility was more than double that of the bond, at 65 versus 31.