The British pound sterling fell to its lowest level ever against the US dollar. In the turmoil of overnight trading, the pound hit a low of £1 = $1.04. It lost 5% of its value in a spiral.
The United Kingdom’s sovereign currency, the pound sterling, is the oldest currency in the world still in use today. It is currently holding above the US dollar/pound parity as it has recovered 0.03 cents on the dollar, jumping to 1 pound = $1.07.
The pound has been consistently declining against the US dollar since 2007 and the subsequent financial crisis. While it has lost 20% of its value this year, it has lost half its value against the dollar over the past 20 years.
In light of the sudden drop in UK purchasing power, commentators such as Eric Voorhees, CEO of ShapeShift, have suggested that the pound is more volatile than bitcoin (BTC) right now. In numbers, bitcoin has fallen 50% against the pound this year, but is up 2% today and 9% over the past week.
The sharp drop in the value of the pound is largely due to last week’s budget announcements. The Financial Times has reported that tax cuts and energy subsidies introduced by new Chancellor of the Exchequer Kwasi Kwarteng could create an unstable financial footing for the UK in the 2020s.
Prime Minister Lizz Truss’ first budget announced the biggest tax cut in a generation. It is reported that the reduction will be due to high energy costs and inflation. Inflation in the United Kingdom is at a century high, hitting double digits last month for the first time in 40 years.
Related: Global Inflation Rising: How Stablecoins Help Protect Savings
Inflation is also rampant across the eurozone. A record inflation of 9.1% was recorded in August, with fears of a harsh winter exacerbated by energy shortages. Commenters and Twitter influencers such as Kobe have been eager to shed light on the situation. Due to the devaluation of the pound sterling, all cryptocurrency tokens seem to be rising in value in Kobe’s home country, the UK.
Only up (my bags are denominated in sterling)
— Cobie (@cobie) September 26, 2022
Others liken the free fall of the pound to a “shit coin” fall or a rug pulling project in which scammers deflate a token and run away with a profit.