Why Bitcoin users love Brexit
The value of Bitcoin made a counter-intuitive surge on Friday as most other markets fell after British voters chose to exit the European Union.
Markets around the world are tumbling in the wake of Britain's referendum to the leave the European Union, but one currency has resisted the nosedive and even surged.
The trading value of Bitcoin, the experimental exchange system that enables users to "mine" code, jumped by as much as 13 percent when British voters chose Brexit. A jump to $681.68 shows the currency's users, at least, continue to believe the currency's value is independent of political upheavals such as Britain's departure from the EU.
"Bitcoin has been trading alongside the UK referendum," Peter Rosenstreich, head of market strategy at Swissquote Bank SA, told Bloomberg. "I don't think it is a traditional safe-haven trade but a strategy to avoid perceived official manipulation."
Users of the digital currency are overwhelmingly male, in their late 20s and 30s, and libertarians (many with anarchist leanings) who want to place their monetary confidence outside the government, according to Zero Hedge, a financial blog. This freewheeling approach could favor the anti-regulatory mindset that sold Brexit to the British public. Even more likely, these users maintain such confidence in the digital currency that they see it as an increasingly safe alternative to the uncertainty of post-Brexit markets.
"While these factors may adversely affect the conventional investments, Bitcoin has the privilege of being an alternative financial instrument," according to a Bitcoin News Service analysis. "Meaning, a negative sentiment affecting conventional investments should turn out to be positive for bitcoin as it may drive the demand for bitcoin."
The inverse relationship between Bitcoin and Brexit was at least a week in the making, as analysts suggested rates were falling when the campaign for Britain remaining in the EU was polling high, Bloomberg reported. As of midday on Thursday, Bitcoin's value had slid to $573.84, representing a 25 percent drop in five days, as the turmoil over the referendum and the aftermath of a hack on a separate digital currency method undermined confidence in Bitcoin.
"With the Brexit deadline approaching we're starting to see a genuine concern for what's to come, and this of course has been reflected across the global markets space, which does include bitcoin," said Ryan Rabaglia, head of wholesale product management at ANX International in Hong Kong. "We had a surprise earlier this week of a prominent exchange having technical difficulties. As it is in the world of bitcoin, when that happens, everyone panics and assumes the worst."
The post-Brexit surge of Bitcoin as other markets plummeted constituted an even bigger surprise. The jump in Bitcoin value is far more striking than the hike in gold prices, because gold is traditionally considered a "safe haven" – a good bet for investing when uncertainty hits markets.
Bitcoin users appear to feel the same way about Bitcoin, as the young, tech-savvy libertarians who champion Bitcoin believe they can literally put their money into digital.