By Jamie Redman,
This year’s Brexit vote caused turbulent economic times for European residents, as many sovereign currencies and stocks plunged. During this period, the British exit from the EU caused Bitcoin’s value to spike as many turned to the decentralized currency as an economic safe haven. On December 4, the cryptocurrency’s price may rise again as the Italian constitutional referendum prepares to shake up Europe’s economy once more.
Italian Referendum May Send Investors to Bitcoin
December 4 will be an eventful day for worldwide markets, as the globe may get an economic shock. Italian citizens will vote on amending the constitution by changing resolutions — alongside absolving powers given to the state, Parliament, and bureaucrats. During this time Italian government bonds and securities have been selling like hotcakes with many preparing for an economic crisis.
Furthermore, Prime Minister Matteo Renzi has detailed he will quit if people vote against the Italian bank resolutions.
The European region is indeed preparing for a rude awakening as the Financial Timesreported eight troubled banks could fall by the wayside if Renzi loses. If the Italian referendum goes sour, it could mean investors could turn to an uncorrelated asset such as bitcoin.
Italian residents have six cryptocurrency exchanges to choose from, including: Coinbase, CleverCoin, LocalBitcoins, The Rock Trading, BitBoat, and Bitstamp. Moreover, the country has eight bitcoin ATMs and a friendly environment for purchasing cryptocurrencies. Just recently, Italy’s largest cab service started accepting the virtual currency for fares. And a bitcoin price surge may not be only limited to Italy if the vote sparks global purchasing.
Brexit Caused Bitcoin Demand Prior to Vote
On June 23 the bitcoin price dipped to a low of $550, yet just before the Brexit vote came in the cryptocurrency spiked to $675. As soon as the “Leave” decision was announced, global stock markets began to plunge. However, gold and bitcoin values went up significantly as investors turned to safer hedges. One week before the vote took place the San Francisco-based exchange Coinbase saw a 55% rise in British registrants and a 350% increase in UK sales.
The British bitcoin push is “a reminder that bitcoin has long been a hedge against turmoil in Greece, capital controls in China, and macroeconomic issues,” said a Coinbase spokesperson. Another European exchange, Kraken, also witnessed significant demand during the Brexit vote.
“A lot of people are buying bitcoin for pounds and euros,” said Jesse Powell, CEO of San Francisco-based Kraken, the world’s largest bitcoin exchange in euro volume. “Our volume has doubled over the last 24 hours. We saw a huge spike in that market. People are looking for a safe place to keep their money, amidst all of this uncertainty.”
Italy Prepares for Market Chaos
Italy is one of the EU’s largest debtors, and the aftermath of its controversial referendum vote could be disastrous. The country’s borrowing has led to financial instability as many of the banks have been mismanaging lending practices. Financial Times reporter Rachel Sanderson stated, “Italy’s banks have €360bn of problem loans versus €225bn of equity on their books after successive regulators and governments failed to tackle a bloated financial system where profitability was weakened by a stagnant economy and exacerbated by fraudulent lending at several institutions.”
Many countries around the world are suffering from economic hardships. Bitcoin use is increasing within these regions such as Venezuela’s hyper-inflation to India’s recent demonetization. Italy’s referendum is sure to cause market chaos. The question is, will people again turn to Bitcoin again amidst the economic shakeup?