Last week saw the British public voting to leave the European Union. Though it has been a distinct possibility, the solid reality of it only materialized when those votes got counted. This has caused a large range of responses, most of it negative. Markets dropped, with the British pound sterling taking a massive hit. Another currency that took a beating was a digital one. Bitcoin was doing well for the past few weeks, but it seemed that the Brexit vote managed to halt its relative stability as it took a slight nosedive in worth.
The connection between the Brexit vote and Bitcoin can only be better understood with a little background on what the vote was about. The Brexit vote was mostly about whether the UK was going to stay in the European Union. Originally the European Economic Community, the EU provides member countries with several benefits like being part of a common market and free movement. It does have a lot of restrictions, though, with member countries being required to follow EU laws in trade and other matters.
These restrictions have led to factions in the British government seeking to leave the EU. The first attempt was back in 1975, but 67 percent of British voters voted to remain. This time around, Prime Minister David Cameron initiated a referendum in response to calls from his party to give voters a chance to let their voices be heard. With the Leave vote winning at 52 percent to the Remain vote’s 48 percent, many of the Brexit supporters are declaring a win for their side. But with the prospect of one of the world’s larger economies leaving the EU, there are a lot of economic effects.
The economic ripples
With the global economy functioning like a giant spider’s web, the consequences of Brexit can be rather profound. This can be seen in the initial effects of it when the news filtered out. Over two trillion pounds worth of investments were wiped out as the world economy took a hit. Sell off of stocks was in astronomical levels and the British pound took a major hit to $1.33 from its initial $1.50 at the start of the day.
For Bitcoin, there have been good and bad effects. On the run-up to the referendum, many experts pointed out that it was one of the major reasons for Bitcoin’s rise in price, even reaching the $700 mark. Bitcoin is seen by many as a perfect “shelter from the storm” and people were putting their money into it to ensure that it would be safe from any economic turmoil. It may not have been “perfect,” but it did manage to protect people’s investments.
It is even now starting to see recovery, unlike the British market. Bitcoin’s cross-national nature and its non-dependency on a single government have made it particularly resilient against market changes. Overall, as the world economy tries to struggle with how to deal with Brexit, many experts think that Bitcoin will be seeing an increase in prominence as many will be seeking a way to protect their capital from further changes.