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Bitcoin price surges over 7% as pound tanks

SAN SALVADOR, EL SALVADOR - JUNE 01: President of El Salvador Nayib Bukele delivers a message to the citizens as he celebrates his third year in office at the Legislative Assembly of the Republic of El Salvador building on June 1, 2022 in San Salvador, El Salvador. Salvadoran President Nayib Bukele is celebrating his third year in office. (Photo by Ulises Rodriguez/APHOTOGRAFIA/Getty Images)
El Salvador's bitcoin-friendly president Nayib Bukele seized the opportunity to remind the UK that the Central American nation made bitcoin legal tender in September 2021. Photo:Ulises Rodriguez/ Aphotografia/Getty

Bitcoin made a surprise rally as equity markets continue to slide and amidst warnings that the pound could fall below dollar parity.

The UK is experiencing slower growth and rising inflation caused by the government's borrowing throughout the coronavirus pandemic, supply chain disruptions with China and rising commodity prices due to the war in Ukraine.

This inflationary environment was then exacerbated by the British chancellor of the exchequer Kwasi Kwarteng who signalled that he would commit to billions of pounds of extra borrowing.

Last Friday, chancellor Kwasi Kwarteng said he intends to scrap the UK's top income-tax rate of 45%, stop a scheduled rise in the national insurance rate, and abolish the stamp duty on property purchases of under £250,000 ($270,000).

Check: Crypto live prices

He followed this announcement on Sunday, with the suggestion there could be even more tax cuts coming.

Forex markets responded to the new chancellor's mini budget on Friday with the pound falling against the dollar to its lowest point on record (GBPUSD=X).

Although the dollar is rapidly strengthening, US equities are in a tumble, with Wall Street’s S&P 500 (^GSPC) closed on Monday at lowest level since December 2020.

However, amid the collapsing value of the pound and sliding equities, bitcoin (BTC-USD) has experienced an early week rally.

The world's largest digital asset by market cap (BTC-USD) is up 8% in the last 24 hours according to data from Coingecko, now priced at $20,240 per coin.

Cryptocurrency prices have shot up across the board with the combined market cap of all digital assets shooting up by 5.7% today to $1.01tn.

Watch: 'Bitcoin will eat into global finance until it's $1m per coin' | The Crypto Mile

El Salvador's bitcoin-friendly president Nayib Bukele seized the opportunity to remind the UK of tweets he posted just after the Central American nation made bitcoin legal tender in September 2021.

At that time Bukele's regime faced ridicule from the IMF, the European Central Bank and the Bank of England for presiding over the new Bitcoin Law that the financial institutions said would be disastrous for El Salvador.

On Tuesday, Bukele reminded the Bank of England in a tweet directing them to a message he had sent in wake of the Bitcoin Law in November 2021.

El Salvador's President Nayib Bukele speaks during a ceremony to lay the first stone of Chivo Vet, a veterinary hospital financed with the gains El Salvador has obtained from its bitcoin operations, in Antiguo Cuscatlan, El Salvador November 1, 2021. REUTERS/Jose Cabezas
El Salvador's President Nayib Bukele: "I told you". Photo: Reuters/Jose Cabezas

The Salvadoran president sent the Bank of England a message on Twitter saying "I told you."

He attached last year's message which read: "I’m really concerned about the Bank of England printing money out of thin air."

Bukele continued by reminding the UK's central bank of another comment he had made after El Salvador enacted its Bitcoin Law.

He attached another tweet from last year that stated: "Bank of England is 'worried' about El Salvador’s adoption of Bitcoin? Really? I guess the Bank of England’s interest in the well-being of our people is genuine. Right? I mean, they have always cared about our people. Always. Gotta love the Bank of England."

Speaking to Yahoo Finance bitcoin pioneer Max Keiser gave an update from the first and only country to date that has made bitcoin legal tender.

Keiser said: “El Salvador not only made bitcoin legal tender but the President and the finance minister Alejandro Zelaya's goal is to make all Salvadorans individually sovereign and they understand that only bitcoin can do this because only bitcoin is truly decentralised to the point of separating money from state – and all other centralising forces.

"This is the complete opposite of a dictatorship, President Bukeke is the opposite of a dictator."

Keiser then claimed that El Salvador would only use bitcoin as legal tender and that altcoins would not receive the same warm welcome within the nation.

He said that altcoins, such as ethereum (ETH-USD), would instead be deemed and regulated as securities.

He added: "None of the other altcoins qualify for this including Ethereum (ETH-USD), Cardano (ADA-USD) and Ripple (XRP-USD), and the rest.

"For this reason the new securities laws soon to be passed in El Salvador treat everything that’s not bitcoin as a security that needs to get approved by the securities regulator."

Watch: US Senator: 'Digital assets will be as big as the internet itself' | The Crypto Mile