Brexit has been delayed until Halloween 2019, with the EU and cryptocurrency markets responding strongly to the news.
For those not following the Brexit situation, the United Kingdom voted in a monumental referendum in 2016 to leave the European Union. While the process has spanned the course of years, the last several weeks have been critical in shaping the nature of the U.K.’s exit. In March, despite months of analysts saying otherwise, the U.K. appeared headed towards a No-Deal Brexit, which would have created for an abrupt transition.
The end result of a No-Deal Brexit, which held ramifications for cryptocurrency, was an immediate cease trade and interaction between the U.K. and the European Union, with no negotiations in place on how their relationship would be handled moving forward. Such a situation would have led to inflation for the Pound and a general drop in confidence for both U.K. and E.U. currencies, likely leading to a drop in the Euro as well.
At the same time as a No-Deal Brexit was looming over Europe, the cryptocurrency markets took off on an explosion that saw Bitcoin rise over 30 percent in a week. Analysts were calling for crypto as an alternative to the British Pound and Euro, given that both currencies were facing a convoluted and likely volatile future. Similar to its function in developing countries and those prone to hyperinflation, Bitcoin became a more attractive means for wealth storage in comparison to its European fiat counterparts.
However, last week Parliament voted against a No-Deal Brexit, forcing Prime Minister Theresa May to come to terms with Brexit in a manner that included negotiating a road forward with the E.U. Today, Brexit has again been put on hold, as May was able to convince European Union leaders to push back the U.K.’s exit to the end of October.
Predictably, the cryptocurrency markets responded to the news, with Bitcoin falling 5 percent and an overall decline in valuation for crypto after weeks of bullish price movement. On one hand, the markets were likely in an overbought position and due for a retraction, considering April brought about the first positive price movement in over a year.
However, Brexit undoubtedly played a role in the sudden drop in price for Bitcoin and cryptocurrency. Now that the United Kingdom has an additional six months to smooth out the details of Brexit, both the Pound and the Euro are facing a less dire situation. Bitcoin originally appeared to be a more stable choice relative to fiat, particularly with the economic uncertainty being generated by Brexit, but now has investors thinking of the highly volatile price swings that characterized 2018.
Nonetheless, today’s price loss may turn out to be a minor correction as the crypto markets push for a bullish 2019 compared to last year. Analysts have been quick to point out that the most recent price rally is occurring in an industry with substantial more adoption that it held previously, with cryptocurrency and blockchain as a whole gaining traction in new sectors.