As stock markets are declining over the past months with fears of a looming trade war, cryptocurrency markets are way up, slowly resurging into their peak levels. Are these two things connected? Could we say that there is an adverse relationship between the stock market and the crypto market as a whole?
The truth is that there is no correlation between the stock market and the crypto market in neither direction. Although it is claimed that it has a direction correlation with the VIX price, this claim can be revoked. The last two times the VIX has surged, the BTC behaves in two completely opposite manners. At the end of 2018 when the VIX was creeping up, the BTC’s rate cut in half from $6,000 to $3,000; in the recent month when the VIX is higher, the BTC has gain substantially (from approximately $6,000 to $8,000).
With that being said, it is impossible to claim that cryptocurrencies pricing isn’t connected or related to any global events. The whole reason the Bitcoin has raised from its ashes over the past few years is the distrust of the younger generation in governments. These are the same underlying reasons for electing Donald Trump, the most unpresidential president the USA has ever had; people were and are still looking for a turn of events in the way the world is run and managed.
One of these events that have been taken place while the Bitcoin was becoming trendy, sexy, and sought-after, is the British vote for a Brexit. No one believed the result of such poll will be anything besides “Stay in the EU” and that is exactly why the people have voted for Brexit - to tell authorities that this is still a democracy and what matters is the people’s vote. The vote got politicians over in the UK so frightened of acting against it that the British Parliament has denied all agreement proposals that was brought to it, eventually leading for PM May to resign.
The next thing in the Brexit chain of events is either reaching an agreement with the new UK leader, or exiting the EU without custom agreements.
Exiting the EU without an agreement means mayhem. The BoE said that such an exit will be worse than the 2008 crisis, and most economists with agree with that prediction provided by a rather traditional and not awfully vocal central bank. British expatriates in the EU, supposedly more than a million of them, may be forced to leave their new life behind and go back to the UK, and vice versa.
The nation’s hopes are lying in the hands of the person who will be elected as the new UK president. Odds are that it will be Boris Johnson who lead the Brexit campaign, and is globally known as the British Donald Trump. He already stated in several occasions that he would leave in October with or without a deal, and in other words - there will be no deal made.
Hence, Brexit will wreak havoc through the British economy at around October, and that will propagate globally, posing a unique opportunity for cryptocurrencies to be in high demand again.
Just think of European expat forced to remit their money from the UK, while the Pound Sterling is crashing high and international money transfer providers and banks not accepting any transfers (similarly to what happened on the day of the Brexit vote). Think of the poor British expats trying to repatriate their funds back in the UK and realizing 30% of their wealth has been crashed in a split second because of the EURGBP exchange rate change.
Even SMEs and corporations on both sides of the fence are likely to feel a huge mistrust with the system with arbitrary decisions changing the entire global trade situation. There are many European businesses who built their business on selling to the British audience which will no longer be profitable with no trade agreements, paying full tariffs on all goods.
The tidal waves will spread far across the English channel on both of its sides, and may cause the global economy to crumble for an extended period of time. A lot of money will be put out of traditional assets in the hands of a generation that is used for high returns, loves speculations. This may be the first MASSIVE crypto-frenzy.
A lot can happen in this coming October, stay tuned!
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