Will a Botched Brexit Help Bitcoin Boom?

06/07/20

Will Britain's Brexit encourage more Bitcoin buying?

Some important world events occurred this week, but they battled for news space with the infection “spikes” (spikes assume the numbers go down quickly!). One story that could easily have sailed by was that as of June 30th, Britain can now no longer officially request an extension to their Brexit negotiations. Also, further U.S. Dollar weakening looks more and more likely as we head into July. We discuss how to invest in crypto in a structured way and why recent Chinese moves on Hong Kong may spell the end of the city as a financial hub.

 

Brexit & Bitcoin

In terms of volume, Britain is number three in crypto worldwide behind the U.S. & Russia. This is more impressive when you consider the much smaller population. With Brexit looming, we would expect this to increase.

Britain has already officially left the European Union and prior to the onset of the coronavirus, were in the process of negotiating their exit terms. These negotiations were to conclude at the end of 2020 but many in the markets assumed that there would be an extension to this time frame, particularly with the disruption caused in the last few months. This is no longer possible. 

As of June 30th, it is now impossible to officially request an extension. Negotiations have become more and more frosty and the possibility of Britain leaving with no agreement, and on basic World Trade terms, is now more likely. Economically there are very few who really believe that this will be beneficial to UK trade and hence we expect further erosion of the value of GBP. 

With the already large and increasing awareness within the UK of crypto as an alternative and safe-haven currency, we would not be surprised to see more activity in the months ahead.

 

As GBP loses value we expect to see more interest in crypto

Source: TradingView

 

Dollar direction

As GBP loses value, at least it’s not as wobbly as the U.S. Dollar. We have heard repeated calls by some big beasts on Wall St. this week about the declining prospects for dollar value. We are inclined to agree.

As the United States hit a record 50,000 infections on just one day last week it’s safe to say that any planned return to normal is certainly further out than had been hoped. Combine this with the requirement for further support for those either unemployed or furloughed from their jobs and a trade war with China (and possible selectively with the European Union) in the air, and we are less inclined to hold too many greenbacks.

As we have already mentioned in the past, we are not fans of the stock market at current levels, and we would expect more rather than less turmoil this side of Christmas so our outlook for cryptocurrency values versus the dollar remains benign.

 

Charting would suggest further USD weakening from current levels

Source: TradingView

 

How to buy Bitcoin - A strategy

How you actually buy Bitcoin or other cryptocurrencies is handily laid out in our blog but the question of when to buy or indeed how much can be daunting at the best of times. 

For most of us, actively trading digital gold intraday may be a bridge too far, if only because of the time constraints of watching every move as it happens. At the same time, holding cryptocurrency amongst your asset portfolio on a long term basis, if that’s your preference, can lead to the question of when to buy.

Traditionally, when a couple marries they begin to look for a home to buy. Economically this makes no sense. The correlation between when you find love and the optimum time to invest is non-existent. Calling the bottom or top of a market is also fraught with miscalculations.

We would suggest that you treat your investment in crypto the same way you pay into your pension fund. Incrementally and at a rate that is affordable to you. You will be essentially averaging in over time, which should increase your chances of long term growth. 

An alternative would be to buy the dips based on charting but this should be part of a wider strategy and relies on you having knowledge of why the prices have dipped and exactly how you recognize the bottom. Hindsight is a wonderful thing and if we could, we would all go back to the beginning of the last decade and buy more bitcoin.

Adding to this, don’t discount the possibility of spreading your investment across a few of the most popular cryptocurrencies like Ethereum or Ripple. As a long term investor, your passivity may actually make you money.

When you begin investing is of course up to you but if you are a regular reader, you will know that current events are only driving more interest in crypto. This will undoubtedly affect prices.

 

Hong Kong & special status

The U.S. Secretary of State Pompeo recently laid down a marker. If China passed a new proposed security law, Hong Kong would lose their favorable trade relationship with the U.S. It would no longer be considered separate from China and as such, its status as a financial hub in Asia would be jeopardized.  

China has since passed the law and the future of the once British run colony is now less hopeful. In retaliation, the UK has offered citizenship to Hong Kong residents and capital flight is expected to gather steam. How this capital is transferred, and what currency will be used, will be interesting as the fear of a Chinese clampdown may be in the offing.

This is just another reason for us to remain bullish on the volume growth of cryptocurrency for the second half of the year.  

 

The news next week

Last week we mentioned we would be watching UK mortgage approvals as a guide to global demand. They came in lower than expected and the local financial press then trotted out all the reasons why it wasn't a concern after all. It should be. Here are some numbers we will be watching in the week ahead:

 

The author works exclusively for Xcoins.com and has spent almost 20 years in trading rooms from New York & London to Düsseldorf & Sydney.

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