Chief Brexit Negotiator for the European Union Michel Barnier recently declared that around 80 per cent of the UK’s Brexit deal had been agreed. With October’s deadline looming, this news marked a change of tone from the EU, lessening the prospect that the UK may end up with a ‘no deal Brexit’.
However, with such a tight deadline to agree upon the final 20 per cent of the deal, and Theresa May still facing a serious challenge to her premiership, we still expect to see much volatility in the pound over the coming months and beyond. So, if you’re looking to invest in this time, cryptocurrencies may be a good alternative. In this post, we take a look at why.
What is the difference between a cryptocurrency and the pound?
One of the main differences between traditional currencies (also known as fiat currencies) and cryptocurrencies is that cryptocurrencies are not attached to or regulated by a central government.
For example, the pound is linked to the British government. This means that when we receive Brexit based news, economic announcements, unemployment figures or government statements, the value of the pound will fluctuate as its performance is linked to the government’s.
However, a cryptocurrency such as bitcoin isn’t centrally regulated and so isn’t affected by these announcements or government decisions as much. As such, many people see them as a good way of diversifying their portfolio to hedge against the risks posed by traditional currencies.
Could they help your portfolio?
With Brexit now on the horizon, it is likely that the euro and the pound will experience extreme price volatility in the run up to England actually leaving the European Union.
Since the referendum result was first announced, the pound has been in a steady decline in value. At times, it was worth less than a euro.
Should the value of either currency take a further plunge as we reach the deadline, then diversifying your portfolio to include cryptocurrencies such as bitcoin to hedge against risk.
If you’re interested in trading bitcoin but don’t want to hold the physical currency and own a wallet, then spread betting or CFD trading with GKFX could be a more preferable option.
To conclude, over the coming months, we’re expected to see some extreme price volatility in the value of the pound and euro. If you’re interested in investing during this period, then it could be a good idea to diversify your portfolio with cryptocurrencies