Bitcoin is the Ideal Safe Haven for UK Citizens Right Now
The fact that Prime Minister Boris Johnson’s Conservative Party won a historic victory in the UK election initially dissolved Brexit uncertainty concerns. Now the PM has full control over the UK parliament, so the latter cannot hinder his rush to handle the Brexit process.
However, the market’s enthusiasm didn’t last long, as Johnson surprisingly decided to make it illegal for the government to extend the deadline for the so-called Brexit transition beyond December 2020. It refers to the period when the UK and Europe have to reach consensus on their trade relationship. Considering that the UK will likely leave the European bloc on January 31, the two sides have only 11 months to sign a trade deal.
European leaders and the British opposition claim that the timeline is too tight for such a complex deal and recommend at least two years of talks after the official withdrawal date. Markets fear that Johnson’s decision to rule out any extension attempt might lead to a no-deal Brexit, which is the worst-case scenario for the British economy. Britons will have 11 long months of confusion, and Bitcoin might act as the perfect safe-haven tool.
The risks of a no-deal Brexit are real as soon as Johnson doesn’t change his mind or the Europeans don’t make serious compromises. However, European Commission President Ursula von der Leyen doesn’t believe that a trade deal could be reached within such a short timeframe. She said:
It is basically impossible to negotiate all of what I’ve mentioned.
Elsewhere, Johnson doesn’t seem to be in the mood to reverse his decision, especially when he had been previously humiliated by the pre-election parliament to break his own promises.
Bank of England is Ready to Cut Interest Rate
Last week, Bank of England (BoE) Governor Mark Carney surprised investors by hinting that the central bank was ready to cut the interest rate if the economic growth continues to be sluggish. The last time when the BoE cut its benchmark interest rate was in 2016, so the move might turn bullish for Bitcoin.
During the last two meetings last year, two out of nine members of Monetary Policy Committee (MPC) unexpectedly supported a rate cut from 0.75% to 0.50%, citing weak labor market and Brexit uncertainty.
Carney’s comments prove that more policymakers, probably a majority, don’t mind to cut the rate.
After Carney, two other MPC members – Silvana Tenreyro and Gertjan Vlieghe – expressed their readiness to support a rate cut if the economic weakness persists. Tenreyro said during an event:
If uncertainty over the future (EU) trading arrangement or subdued global growth continue to weigh on demand, then my inclination is towards voting for a cut in Bank Rate in the near term.
While Tenreyro admitted she would vote for the cut within several months, Vlieghe said yesterday that he was ready to ease the policy as early as later this month – BoE’s next meeting is scheduled for January 22.
“I really need to see an imminent and significant improvement in the UK data to justify waiting a little bit longer,” Vlieghe stated.
However, according to ONS data released earlier today, the UK’s GDP for November declined 0.3%, while analysts expected no change.
Thus, it is likely that the BoE will ease its policy sooner than later. Lower interest rates make the national currency cheaper, which is why Britons might turn to Bitcoin.
Do you think Britons have better safe-haven options than Bitcoin? Share your thoughts in the comments section!