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On Sept. 26 the British Pound hit a record low against the U.S. dollar following the announcement of tax cuts and further debt increase to curb the impact of a possible economic recession. The volatility simply reflects investors’ doubts about the government’s capacity to withstand the growing costs of living across the region.

The U.S. dollar has been the clear winner as investors seek shelter in the largest global economy, but the British Pound’s weakness could be net positive for Bitcoin. The GBP is the world’s oldest currency still in use and it has been in continuous use since its inception.

Fiat currencies are a 52-year old experiment

The British Pound (GBP), as we currently know, started its journey in 1971 after its convertibility with gold or equivalent was effectively terminated. Since then, the currency issued by the Bank of England has not had a fixed valuation.

Inflation has been at the centerpiece of debates all throughout 2022 after central banks added liquidity to the markets in the previous 2 years to stimulate economies. As a result, in August 2022, the U.K. saw a 9.9% increase in consumer prices versus the previous year.

On Sept. 22, the government announced an unprecedented tax cut, the highest since 1972, causing the British Pound to reach an intraday low of $1.038 versus the U.S. dollar on Sept. 26. Analysts concluded that government bond issuance would increase to pay for the lesser tax, and interest rates would have to be aggressively increased.

While the loss of value in the GBP is shocking, one must analyze exactly how important is the global currencies market, and how relevant is the British Pound to cryptocurrencies. The first part is relatively easy to answer, but it depends on whether or not bank deposits, savings and certificates of deposits are accounted for. If we stick to the Base Money definition, exclusively measuring circulating cash and deposits at the central bank, the Pound Sterling stood at GBP 1.05 trillion in June 2022.

In U.S. dollar terms, the U.K. currency represents $1.11 trillion out of the global $28.2 trillion in fiat Base Money, or roughly 4%. On the other hand, the Euro, the unified currency of the Eurozone nations, leads the ranking with $6 trillion, closely followed by the U.S. dollar with $5.5 trillion. Hence, the significance of the GBP remains high, backed by the region’s $3.19 trillion gross domestic product in 2021, the fifth largest in the world.

In October 1990, the British government decided to pair the GBP based on the Deutsche Mark because Germany was the leading economic force in the region. However, the country was forced to withdraw from the pairing in September 1992 after Britain’s lackluster financial performance made the exchange rate unsustainable. As a result, during “Black Wednesday,” the interest rates suddenly increased from 10% to 15%, and the GBP currency devalued by 25% overnight.

Related: GBP follows euro; The pound-dollar rate hits all-time low

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Very few assets can compete with fiat money in terms of relevance. Gold has roughly $6 trillion in value, excluding jewelry and non-financial assets, is a definite contender. The tech giant, Apple also leads the stock market valuation with a $2.45 trillion capitalization, followed by oil producer Saudi Aramco which is at $2 trillion.

Estimating the relevance of the British Pound on cryptocurrencies is not simple, but according to data from Nomics, out of the global Bitcoin fiat trading, the U.S. dollar is the absolute leader with 89%, followed by 4% from the Japanese Yen, 3% for Euro and 2% for the Sterling.

Consequently, the direct impact on Bitcoin trading seems relatively small, but the fact that the oldest fiat currency reached an all-time low against the U.S. dollar could be a game-changer for cryptocurrencies.

According to Porkopolis Economics, the average issuance rate of the Pound Sterling since 1970 has been 11.2% per year. This figure directly compares to Bitcoin’s issuance of 900 coins daily or 1.7% yearly.

Once the general population realizes their savings and investments are being devalued more aggressively by central bank stimulus measures, the benefits of a decentralized form of money could become clear. But, for now, the U.S. dollar has been the clear winner, reaching its highest level in over 20 years compared to other major global fiat currencies.