Last week, the British Pound got absolutely crushed. The GBP to USD exchange ratio hit levels that haven’t been seen outside of the brief crash in 1985. This has come as a combination of US policies tightening their currency, giving relative strength compared to other currencies, and as a result of the new British Prime Minister, Liz Truss, announcing a series of tax cuts on high earners and corporations.
These tax cuts, effectively trickle down economics or “Reaganomics,” are a modern day spin on the tax policies implemented during Reagan’s presidency. These policies have been well studied by economists, and deemed ineffective at advancing a country's economic well being. This is the biggest tax cut the UK has seen in 50 years.
All of this led to deeper mistrust in the UK, and markets dumped the GBP to unseen levels. The GBP hit a low of 1.03 USD. Over the past 4 decades, the average value of a GBP has been roughly 1.50 USD to 2.00 USD. This means the average UK citizen is seeing their wealth dissolve away incredibly quickly, and many are turning to Bitcoin to solve that.
According to CoinShares, GBP/BTC trading pairs have seen a massive spike of 1,150%. Bitcoin has largely gained adoption due to its economics: a fixed supply that ends up being long term deflationary. It makes sense that countries facing large scale inflation are fleeing to what could be seen as a more stable asset, as people used to flee to gold in times of inflation.
What’s perhaps most interesting is recent BTC performance. While it hasn’t been ripping upwards, it has been outperforming most world currencies and the US market. BTC is down 3% over the past month, while the US market is down 9%.
The British Pound did recover from this shock, but is sitting at 1.11 USD. A year ago, the GBP was sitting at 1.35 USD. Any Americans looking to book a trip, now may be the time.