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On the 23rd of June 2016 citizens of the United Kingdom cast their vote in a referendum ballot on whether or not to leave the European Union. On the 24th of June 2016 they awoke to find their pounds worth eight percent less than the day before, and trading against the US dollar at the lowest rate seen in more than three decades. For those with sizeable investments vested in cash, a quick drop in value, even a marginal one, can equate to a tremendous loss.
At the same time, there’s a community that stirred to a dramatically different scenario, with their investments in fact gaining as a result of the Brexit vote outcome. This is the community that look to alternatives for wealth preservation. Those with stores in the traditional safe haven assets such as gold and silver weathered the initial storm comfortably, but those holding bitcoins are the ones who are really set for dramatic gains here on out. In the 24 hours following Brexit, bitcoin investors enjoyed a 7% rally in price, once again highlighting the undeniable correlation between economic instability and bitcoin value.
If we consider other recent instances where bitcoin has experienced significant surges in value, most can be attributed to situations where citizens face financial uncertainty. Cyprus and their draconian austerity measures. Greece facing mounting debt and the pressure on civilians as a result of massive bail-outs. China repeatedly devaluing their Yuan and stringent controls on outward capital flow.Russia with her ruble plunging by double digits. Venezuela where they have run out of money to print more money. And Brazil enduring a woeful economic recession and major political unrest.
If we examine the demand for bitcoin over the last few months, even a year or two, demand has followed a positive trend. There are several fundamental factors driving the escalating interest and adoption of bitcoin. Most notably is an ever-growing lack of confidence in the traditional banking system, fuelled by widespread unrest and uncertainty in governments, and subsequently central banks
As a decentralised commodity, bitcoin has frequently been touted as ‘digital gold’ in so far as being a reliable store of value that holds added benefits of fungibility, portability and acceptability. Bitcoin offers true sovereignty to its holders as it is not controlled by any central entity. It is immune to political or commercial persuasion, less affected by regular market sways and your balance can never be frozen by a financial institution. These have been critical qualities in bitcoin slowly - but steadily - finding favour as a viable inclusion in a diverse investment portfolio.
There’s no doubt in my mind that bitcoin is a great investment, most especially for those looking to preserve and build on existing wealth. The returns we’ve achieved for our clients are typically above ‘average’ market rates, but that’s not to say that I would ever recommend putting all your wealth in bitcoin. Brexit has merely provided another opportunity to show that in turbulent economic times it’s imperative to have an investment portfolio apportioned to the right asset classes to ensure you not only protect your wealth but continue to see positive results despite a downturn in more traditional markets.
After years of studying, monitoring and trading in the market, and navigating the difficult maturation stages, I firmly believe that bitcoin should be considered as an asset class of choice to achieve this. As a Brit myself, I know that I have steered clear of a potential financial blow by holding bitcoin at this time of instability and uncertainty, and found prosperity and profit instead.
The crux is that the economic ripples of Brexit are going to be felt for quite some time to come, with the situation quite likely becoming far more dire before it eases somewhat. Brexit aside, there is an overall shift in global markets as economic powerhouses adjust monetary policies in an effort to postpone inevitable tempestuous financial times. While these may work in the short-term, the long-term result is an exponential crisis. Any investments remotely linked to the traditional financial system will be subject to increased risk. And this is where Bitcoin shines.
Considering Bitcoin is entirely independent, it can offer a level of safety and security in an otherwise uncertain world; and a primary reason we’re seeing increased interest in the wake of a controversial move like leaving the European Union.