Fiat volatility

Times are tough for several Western fiat currencies. Both the euro and the British pound recently fell to lows. The dollar is still strong, but for how long? Meanwhile, bitcoin seems to be taken more and more seriously.


Two weeks ago, the British pound reached its lowest ever valuation at $1.04 per pound. A year ago it was about $1.36 per pound. The decline accelerated recently after the new British finance minister, Kwasi Kwarteng, presented a new economic plan. Together with the new Prime Minister Liz Truss, he wanted to cut taxes sharply and deregulate, a strategy that is accompanied by an additional public debt of ?? 72 billion.

The plans sent investors fleeing British assets en masse and confidence in the pound plummeted. Since then, Kwarteng has changed some of his plans, but much damage to the trust in Truss and Kwarteng’s policies has already been done. The price is now at $1.11 per pound.


The euro is also going through uncertain times. The euro dipped two weeks back to $0.96 per euro, the lowest point in twenty years. A year ago, the exchange rate was about $1.16 per euro.

The energy crisis seems to be the main culprit of the euro’s devaluation. Due to rising gas prices and a war on European territory that is far from over, investors have little confidence in the eurozone. The weak euro is fueling inflation further, so that imported products, including energy, continue to become more expensive. The price is now $0.97.


The US dollar appears to be strong in this bear market. Investors fled en masse to the currency, a relatively safe investment in these uncertain times. Part of the price increase can probably be explained by this. But whether this will be a positive development in the long term remains to be seen. The massive move towards the dollar is creating an unsustainable situation for risky assets, including equities, predicts Morgan Stanley chief strategist Michael Wilson. According to him, multinationals should expect lower profits due to the weakness of international currencies.


While fiat volatility is underway, bitcoin remains relatively calm. This has been noticed by several major media outlets such as The New York Times and Fortune. Bitcoin is often the target of criticism due to the large fluctuations in its price. With major fiat currencies experiencing more volatile performance at the moment, sentiment towards bitcoin seems to be turning a lot more positive.

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