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latest progress

Source: BBC

It seems relatively calm when it comes to the progress of Brexit, however, it is more like the calm before the storm. The British parliament will come out of its summer recess in the second week of September, when Prime Minister Boris Johnson will engage in a series of heated debates with lawmakers in an attempt to avoid a no-deal Brexit. The first confrontation is likely to take place on September 9, when MPs plan to discuss a progress report on the distribution of power in Northern Ireland. Meanwhile, Labor leader Jeremy Corbyn could call for a vote of no confidence in Johnson as early as September 3.

challenge

challenge

At present, it is still uncertain how much impact a no-deal Brexit will have on the UK and the global economy. However, there is something to be learned from the Bank of England's latest statement. Despite keeping its benchmark interest rate unchanged, the Bank of England highlighted the risk of a Brexit-induced slowdown in economic growth, arguing that economic growth "appears to have slowed below potential growth since 2018, reflecting the impact of Brexit on business investment." A number of uncertainties, which in turn have an impact on the UK economy, also reflect weak net trade growth in the global economy."

"As of mid-July, data from businesses suggested that uncertainty over the UK's future trading relationship with the EU had become increasingly evident."

- Bank of England

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Source: CBI UK; tradingeconomics.com

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Cross Asset Check

Although the final outcome of Brexit is still largely uncertain, the potential negative impact of a no-deal Brexit has been partially reflected in financial markets. In our previous article "Bitcoin and a Chaotic World", we reviewed the performance of cross-assets in the early days of Brexit and the logic behind it. Clearly, safe-haven assets such as gold outperformed the pound and the FTSE over that time frame. And this performance was more obvious at the end of 2018, especially after the Brexit vote in the British Parliament was postponed.

As it stands now, GBP/USD is at multi-year lows and 10-year Treasury yields have fallen below an all-time low of 0.5%. Of course, we can separate this from US-China trade war concerns, however, Brexit has been playing a key role in this and we expect Brexit to continue to have an impact on key UK assets in the short term.

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The impact of Brexit on cryptocurrencies

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Source: Cindicator Analytics

According to a study by Cindicator Analytics published on March 28, 2019, 63% of analysts surveyed believe that Brexit remains one of the main sources of risk and uncertainty in financial markets, and cryptocurrencies may benefit from this sentiment By. More than 73% of analysts said they invest in cryptocurrencies in their portfolios when the market’s risk appetite is low. Among them, mainstream currencies with large market capitalization such as Bitcoin, Ethereum and Litecoin will be their first choice. In contrast, around 19% of analysts believe that Brexit will not have a material impact on cryptocurrencies. Another 19% of analysts believe that Brexit will have a certain degree of negative impact on cryptocurrencies.

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The role of contract trading in Brexit

The contract business is a symbol of the maturity of the financial market. The contract transaction plays the role of a commitment between two parties, allowing cryptocurrency investors, traders, miners and other market participants to obtain hedging, risk management, short-term risk avoidance, Price discovery mechanism and other functions; in the context of the increase in overall market risks and uncertainties caused by Brexit, users can effectively hedge market risks through contract products and option products.

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in conclusion

in conclusion

Rising geopolitical tensions have made the term "hedging" the latest buzzword in financial markets. Whether it’s Bitcoin or cryptocurrencies more broadly, cryptocurrencies have become increasingly correlated with traditional assets, whether they are risk hedging instruments or not. The progress of Brexit will undoubtedly be the main talking point in the fourth quarter, with Brexit set to unfold rapidly under the leadership of President Johnson.

In this context, we expect the volatility of the cryptocurrency market to increase. Cryptocurrency traders and traditional fund managers can take full advantage of market volatility opportunities and hedge the overall market through derivative financial instruments such as cryptocurrencies, contract transactions, and options products. risks and generate returns;

Also, since Brexit will no longer be subject to EU rules, it presents an opportunity to reshape the regulatory landscape. It is expected that the UK will more actively embrace blockchain technology innovation, which will benefit people's faster acceptance of cryptocurrencies.

Disclaimer: This material should not be relied upon for making investment decisions, nor should it be construed as a recommendation to engage in investment transactions. Trading digital assets involves significant risks and may result in the loss of your invested capital. You should ensure that you fully understand the risks involved, taking into account your level of experience, investment objectives and, if necessary, seek independent investment advice.