A recent drop in the pound has caused bitcoin’s price to skyrocket by over 10 percent. In this article, Cointelegraph experts explore the impact of the fall on the cryptocurrency market. As a result, halving the rewards for mining bitcoin goes against the ever-increasing supply. Here we can talk briefly about the development of bitcoin cryptocurrency.
The fall of the British pound against the dollar
The recent decline in the pound against the dollar has caused ripple effects in the cryptocurrency market. In the past week alone, the pound has weakened by over 5% and is now close to parity against the U.S. dollar.
The British pound has fallen to a record low against the dollar and the euro. Investors are selling the pound amid fears that a radical new budget plan containing tax cuts will not be fully funded. The uncertainty surrounding the U.K.’s economy has pushed up the government’s borrowing cost. The rate on 10-year bonds has risen from just over 1% in January to over 4% today.
The British pound has suffered heavily due to Brexit and concerns about the country’s economy. It hit a record low against the dollar on Friday and continued to slide on Monday as traders tried to digest the fallout. The last time the pound fell this low was during the Brexit result in 2016, and the dollar reached $1.1407 briefly in March. Despite the new tax plan, the pound has since fallen back to $1.05, down 7% in two sessions. The Brexit vote has also added to worries about the U.K. economy and inflation.
Bitcoin’s price surged by more than 10 percent since
The British pound’s collapse against the dollar has coincided with the rise in bitcoin’s price. While bitcoin has historically been volatile, its fixed supply and deflationary nature mean its price is less volatile than fiat currencies. As a result, it has been relatively stable over the past few weeks. On Tuesday, it hit a high of $20,338.
The price increase can be attributed to investors’ risk-on appetite. Investors have been tempted by bitcoin’s price since Tesla announced it had bought US$1.5 billion in bitcoin and would accept it for payment for its electric cars. However, the company’s plans have met with criticism from investors and environmentalists. In response to these concerns, the company is reportedly conducting due diligence on how much renewable energy is required to mine bitcoin.
Bitcoin’s price surged by more than ten percent in the three months following the British pound’s demise. Bitcoin’s price continued to climb through the end of January and ended at over $29,374 (€32,071).
Bitcoin’s reward halving goes counter to the ever-increasing supply.
Bitcoin’s reward halving is a mechanism to combat inflation and maintain scarcity. It is built into the mining algorithm. The policy is designed to reduce new Bitcoin issuance by half every four years. The halving should increase the price of Bitcoin as fewer new coins will be created. Currently, Bitcoin is experiencing inflation of less than 2% per year and is expected to decrease with subsequent halvings. Its inflation rate is lower than the 9.1% annualized CPI.
The halving schedule ensures that the value of Bitcoin is maintained until the currency’s market capitalization matches the global M1 money supply, which was at two quadrillions U.S. cents at the time of its launch. It also ensures that block subsidies will continue until the currency reaches critical mass when it will be self-sustaining through transaction fees.
The halving occurred in June 2016, when Bitcoin was at about $660. The price dropped to $533 in August and soared to over $20,000 by the end of the year. In total, the cost of Bitcoin rose 2,916% during the year.
The British pound’s collapse against the U.S. dollar is a significant development for cryptocurrency. It is a factor that could push more people to use cryptocurrency, according to an expert at Cointelegraph. Moreover, the fall in the British pound may also boost export businesses. Lower-priced goods are more appealing to overseas buyers. Investors buy and sell vast amounts of foreign currency. They hope to profit by investing in coins that appreciate.