Is it Bitcoin’s heyday? The British pound has fallen to an all-time low against the dollar.

On September 26, the British pound hit a record low against the US dollar to cushion the effects of a potential recession following the announcement of tax cuts and further debt increases. The volatility simply reflects investors’ doubts about the government’s ability to cope with the region’s rising cost of living.

The US dollar has been the clear winner as investors seek shelter in the larger global economy, but the weakness of the British pound could be a positive for Bitcoin. The GBP, or British Pound, is the world’s oldest currency still in use and has been used continuously since its inception.

Fiat currencies are a 52-year experiment.

The British pound, as we know it now, began its journey in 1971 after it was no longer convertible to gold or its equivalent. Since then, the money issued by the Bank of England has no fixed value.

After central banks added liquidity to the market to stimulate economies over the past two years, Inflation is at the center of all economic debates in 2022. As a result, in August 2022, the UK will see a 9.9% increase in consumer prices compared to the previous year.

On September 22, the government announced an unprecedented tax cut, the largest since 1972, which sent the British pound to an intraday low of $1.038 against the US dollar on September 26. Analysts have concluded that government bond issuance will rise to pay. Minimum tax and interest rates should increase significantly.

As shocking as the loss of the GBP is, one must analyze exactly how important the global currency market is and how important the British pound is to cryptocurrencies. The first part is relatively easy to answer, but it depends on bank deposits, savings and certificates of deposit. If we stick to the base money definition, measuring only the money in circulation and deposits at the central bank, the pound sterling stands at GBP 1.05 trillion in June 2022.

In US dollars, the British currency represents $1.11 trillion, or roughly 4 percent, of the world’s $28.2 trillion in fiat base money. In contrast, the euro, the common currency of the Eurozone countries, ranks at $6 trillion, followed closely by the US dollar at $5.5 trillion. Therefore, the value of the GBP remains high, supported by the region’s GDP of $3.19 trillion by 2021.

In October 1990, the British government decided to peg the GBP to the Deutsche Mark because Germany was the leading economic power in the region. But Britain was forced out of the bloc in September 1992 after Britain’s poor financial performance made the exchange rate unsustainable. As a result, during “Black Wednesday”, interest rates suddenly increased from 10% to 15%, and the GBP exchange rate fell by 25% overnight.

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Very few assets can compete with fiat money. Excluding jewelry and non-financial assets, gold is worth nearly $6 trillion. Tech giant Apple leads the stock market with a capitalization of $2.45 trillion, followed by oil producer Saudi Aramco at $2 trillion.

It is not easy to estimate the relevance of the British pound on cryptocurrencies, but according to data from Nomics, the US dollar is the absolute leader at 89% of global Bitcoin fiat transactions, followed by 4% from the Japanese yen, 3% for the euro and 2% for sterling.

So, the direct impact on Bitcoin trading seems relatively small, but the fact that the classic fiat currency is at an all-time low against the US dollar could be game-changing for cryptocurrencies.

According to Porcopolis Economics, the average rate of return of the pound sterling since 1970 has been 11.2% per year. This figure compares directly to Bitcoin’s daily yield of 900 coins, or 1.7% annually.

Once the general public realizes that savings and investment are significantly reduced by central bank stimulus measures, the benefits of a decentralized form of money may become apparent. But, now, the US dollar is the clear winner, reaching its highest level in more than 20 years.