Demand surged for bitcoin as a safe haven from the British pound, which plummeted after the U.K. voted to leave the European Union.
The pound fell to its lowest in more than 30 years, driving demand for assets such as U.S. Treasuries and gold. Stocks and bonds also fell, amid concerns that the U.K.’s exit from the European Union could hurt the world’s economy. Bitcoin, a digital currency unconnected to any government or central bank, is often sought as a haven by holders of currencies that are declining, or that are not fully convertible, such as Chinese renminbi.
"A lot of people are buying Bitcoin for pounds and Euros,” said Jesse Powell, chief executive officer of San Francisco-based Kraken, the world’s largest bitcoin exchange in euro volume. “Our volume has doubled over the last 24 hours. We saw a huge spike in that market. People are looking for a safe place to keep their money, amidst all of this uncertainty.”
Another bitcoin exchange, Gemini, which expanded into the U.K. on Tuesday, has "seen a lot of signups from U.K. residents since then," the exchange said in an emailed statement. “We’ve been open for trading nonstop throughout the week, and are excited to help contribute to digital asset liquidity on a global scale.” Bitcoin’s value rose 7 percent today, to $655.
Digital currencies like bitcoin can help users protect their savings against declines in national currencies and move money across borders without the participation of banks. Bitcoin has provided a haven for citizens of countries like Venezuela, where access to the official exchange rate is severely limited. In Russia, the ruble has seen a double-digit plunge as well, prompting some residents to seek shelter in bitcoin.
Foreign exchange trading spiked all over the world. JPMorgan Chase & Co. said its currency-trading volumes reached a record Thursday night into Friday. The world’s biggest fixed-income trading firm expected to process three times normal daily volume on Friday, CEO Jamie Dimon said in a memo to staff.
"I believe bitcoin has seen some of the benefit from the Brexit over the last few days as consumers are buying bitcoin as an asset uncorrelated with the global monetary system, much like gold," Gil Luria, managing director at Wedbush Securities Inc., said in an email.
"If other countries in the EU pursue a similar path, I would expect some of their citizens to look at the British experience and want to protect some of their funds in bitcoin. Even though bitcoin is volatile, volatility is better than knowing your money will be devalued by 10-30 percent within a few weeks."
© Copyright 2023 Bloomberg News. All rights reserved.