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Bank of America: British pound volatile as a cryptocurrency
Bank of America: British pound volatile as a cryptocurrency
Crypto

Bank of America: British pound volatile as a cryptocurrency

By Marco Cavicchioli - 25 Jun 2020

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According to Bank of America analysts, Brexit has turned the British pound into a highly volatile currency, similar to a cryptocurrency

This is reported by the Financial Times, which discloses a memo by Kamal Sharma, currency analyst at BofA, according to whom in the four years since the UK voted to leave the EU, the sharp fluctuations in exchange rates have made the British fiat currency resemble an emerging market currency, such as the Mexican peso, rather than more stable currencies, such as the US dollar. 

Indeed, according to Sharma, movements in the value of the British pound have become neurotic, if not unfathomable. 

In other words, its performance, from this point of view, would be similar to that of Bitcoin or other cryptocurrencies. 

BofA analysts also point out that this characteristic is persisting even after the financial markets have settled down, following the panic related to the coronavirus emergency.

According to these analysts, the cause is a lack of clarity about the prospects for the currency itself.

In fact, according to another analyst, Vasileios Gkionakis of Lombard Odier, the pound could even fall below $1.10 if no agreement is reached on future relations between Britain and the EU within the next six months, while the euro could converge towards parity, starting from the current rate of £0.90. 

The fact is that, historically, the British pound has been part of the so-called G5 currency group, along with the US dollar, euro, Japanese yen and Swiss franc, and is one of the most traded currencies in the world, therefore regarded as safe. However, developments in recent years are calling this role into question. 

Moreover, it has never returned to the levels it had before the pro-Brexit referendum, losing about a fifth of its value since then. 

It actually fell to its lowest level against the dollar in mid-March after several years, before recovering thanks to the intervention of the Federal Reserve, which de facto slightly devalued the dollar. 

The volatility index of the British pound is now in some ways similar to that of bitcoin, whereas it appears distant from that of the euro. 

While on the one hand, this means that historically reliable currencies such as the British pound can sometimes suffer from pronounced volatility, on the other, it means that bitcoin now no longer has a volatility that differs from that of many fiat currencies, even major ones. 

Considering that bitcoin has only existed for 11 years, while the British pound has existed for several centuries, it is noteworthy that their behaviour in this respect is not so different now

 

Marco Cavicchioli
Marco Cavicchioli

Class 1975, Marco teaches web-technologies and is an online writer specializing in cryptocurrencies. He founded ilBitcoin.news, and his YouTube channel has more than 25 thousand subscribers.

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