The Great British pound sterling has fallen to the lowest level ever against the U.S. dollar. In a flurry of overnight trading activity, the pound reached lows of 1 pound = $1.04. It lost 5% of its value in a spiral.
The United Kingdom’s sovereign currency, the pound sterling, is the world’s oldest currency that is still in use today. It is currently clinging above USD-pound parity, since regaining $.03 cents, bouncing to 1 pound = $1.07.
The pound has been on a steady decline against the USD since 2007 and the subsequent financial crisis. While it has lost 20% of its value this year, it has lost half of its value against the dollar over the past 20 years.
In light of the sudden plunge in the U.K.’s purchasing power, commentators such as Erik Voorhees, CEO of ShapeShift, have suggested that the pound is now more volatile than Bitcoin (BTC). In numbers, Bitcoin is down 50% against the pound this year but up 2% today and 9% over the past week.
The drastic fall in the pound’s value is in large part due to last week’s budget announcements. The Financial Times reported that tax cuts and energy subsidies introduced by the new Chancellor of the Exchequer, Kwasi Kwarteng, may create an unstable financial bedrock for Britain in the 2020s.
In Prime Minister Lizz Truss’ first budget, the biggest tax cut in a generation was announced. The cuts would reportedly address high energy costs and inflation. Inflation in the United Kingdom is at record levels for the century, hitting double digits last month for the first time in 40 years.
Across the channel in the eurozone, inflation is also running rampant. Record 9.1% inflation was reported in August, while fears of a bleak winter are compounded by energy shortages. Commentators and Twitter influencers such as Cobie were keen to make light of the situation. Due to the pound devaluing, all cryptocurrency tokens appear to rise in value in Cobie’s home country, the United Kingdom.
Up only (my bags denominated in gbp)
— Cobie (@cobie) September 26, 2022