With the British pound and the Chinese yuan falling, Bitcoin seems to be adapting to the difficult economic conditions.
As currencies, including the British pound and the Chinese yuan, fall, Bitcoin does not seem to be following suit, rising 6.3% in the last seven days and “flirting” with $20,000.
Macroeconomic conditions, including rising inflation and fiscal uncertainty, have hit global markets. Although Bitcoin has largely complied with economic fluctuations, its strong performance over the past week has… shocked some traders and made it more obvious that the situation is dire.
The British pound fell more than 5% last week and is approaching parity with the US dollar. Analysts attribute the fall to dissatisfaction with the new policies of recently appointed Prime Minister Liz Truss, as well as the growing strength of the US dollar due to rising interest rates.
“This is not Bitcoin,” tweeted Angela Rayner, a Labour Party member of the U.K. parliament, along with a picture of a rapidly declining chart. “It’s the British pound.”
Other major currencies have suffered similarly, with China’s yuan also falling against the US dollar. Analysts attribute it to caution about how the country is dealing with Covid and its growing economic woes.
Bitcoin faced its own suffering in September, rising early in the month before retreating sharply in mid-September amid higher-than-expected US inflation reports.
Although Bitcoin has been presented as a hedge against inflation, its link to US markets demonstrates its growing influence on traditional finance. Cryptocurrency entrepreneur Tyler Winklevoss wrote on Twitter that Bitcoin’s properties “dictate that it should be inversely correlated to inflation”, with its underperformance showing “how early it is”.
As the New York Times’ DealBook reported, Bitcoin is trading largely as a risky asset, much like tech stocks. Its rise last week was something of an aberration, with Bitcoin slightly in the green during the month, while the Nasdaq retreated nearly 10%.
Proponents seem to be enjoying the recent rise, especially as traditional assets decline. Bank of England governor Andrew Bailey has been particularly critical of the cryptocurrency, something Bitcoin Magazine was careful to note.
“The British pound has fallen 12% since the Bank of England governor said ‘Be prepared to lose all your money’ in Bitcoin and cryptocurrencies,” Bitcoin Magazine’s Twitter account reported.
