Bitcoin is showing signs of recovery, registering a 5.3% price pump in the past week to trade at $20,129, according to CoinGecko tracking at the time of writing.
Here’s an overview of what’s happened over the past few days:
- The British Pound fell to a historic low of $1.03 against the USD on September 26, 2022
- BTC/GBP trading volume in Bitfinex and Bitstamp increased by 47,000 BTC
- Bitcoin shows it can benefit from the fragility of fiat currencies
The first cryptocurrency not only performs well in terms of price, but also in terms of trading volume.
In fact, as the British pound reached a new all-time low against the US dollar on September 26 at $1.03, BTC/GBP trading pairs on various exchanges became very active, climbing over 47%. 000 BTC.
Bitfinex and Bitstamp, two crypto exchanges where the pair is listed, saw a phenomenal jump in trading volume that same day, which reached $881 million.
Source: Arcane Research
According to James Butterfill, head of research at CoinShares, this value is 12 times higher than the two companies’ daily average of $70 million over the past two years.
Bitcoin as a hedge or a subject of speculative interest
This latest surge in bitcoin trading volume has sparked discussion about whether there is now substantial hedging demand for the crypto or whether the asset is now the subject of speculative interest.
Faced with the impressive trading volumes recorded on Bitstamp and Bitfinex following the collapse of the pound, analysts remain divided on what this entails.
Some believe that this could be the result of the large number of investors now opting for the largest cryptocurrency by market capitalization to protect themselves from the declines in value suffered by fiat currencies.
Others, however, have reason to believe that it could be caused by traders aiming to take advantage of the volatility the space is currently experiencing.
A Bitfinex analyst shared that trading volume growth of this magnitude shows how Bitcoin can benefit from “the apparent fragility of fiat currencies.”
This is almost the same as what happened with the Ukrainian hryvnia and the Russian ruble earlier this year.
The collapse of the pound sterling
At the center of it all is the sharp fall in the British pound, which lost 7% of its value against the USD last month.
It seems that British Prime Minister Liz Truss’s proposal to increase their government’s borrowing to pay for the tax cuts has sparked fear among investors.
They (the investors) believe that such a decision could increase the country’s inflation rate, which is almost 10%.
The proposal has sparked market reactions in the UK, as five-year government bonds have risen a full percentage since Thursday.
By bond market standards, even an increase of just 1% is considered a huge move.
BTCGBP pair now trading at 17,649 pounds on the daily chart | Source: TradingView.com Featured image from Daily Express, Chart: TradingView.com