Capital preservation is hard to do.. Crypto best performing asset on Brexit. June 27th, 2016

The DAO hack has caused jitters in the crypto markets over the last weeks but things look like they have stabilised and I even dare to say we might come out of this situation stronger for it…..with a soft fork potentially due to solve the situation later this week…

Meanwhile, an unexpected Brexit vote gave way to a new fuel of demand for Bitcoin and Ether on Friday. Brexit left people in panic and wondering what to do next to preserve their capital. The sterling fell over 10% and Euro lost about 3% vs the US Dollar. The Chinese in particular stand to gain the least from the strong dollar move which occurred Friday as their currency is pegged to the Dollar. Already in a tough economic situation, the Chinese would love the opportunity to devalue their currency further but political circumstances make it tough for them to do that (It would push the dollar even higher upsetting US exports and politicians).

We have seen the Chinese break away from the peg from time to time (which usually sends the markets into a panic) but constantly get reassured from officials it won’t happen again…..Today we note that the daily fixings in yuan are creeping lower as the pressure after Friday’s big move becomes too much to bare….

Responding to the plunge in offshore Yuan since the Brexit vote (down 7 handles to 5-month lows over 6.65), PBOC devalued Yuan fix by 0.9% (6 handles) – the most since the August crash – to Dec 2010 lows.

Screen Shot 2016-06-27 at 11.07.57.png

Source: Zerohedge

This was all triggered by the move in GBP which led to huge demand for USD….

Screen Shot 2016-06-27 at 11.14.01.png

While most asset classes around the world were plunging Friday…. Bitcoin and Ether were traded up about 10-15% on fairly decent volumes.

This means that if you were a holder of Bitcoin on friday night, and you wanted to buy a house in the UK (after the sterling fell 11%), your house just got almost 30% cheaper in currency terms.

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