The European region has always been a major Bitcoin market mover in times of economic or political crisis. This is evident from what happened with Brexit this year. The pre-Brexit tension and the post-Brexit shocks caused turbulent economic times for European residents. The Brexit from EU caused Bitcoin prices to spike up considerably and make it the safe haven against the adverse market reactions. December 4th can witness a similar push in Bitcoin prices as EU will witness Italian referendum. While market is waiting to for what might happen, let’s look into the dynamics of the referendum:
On December 4th, the global markets should be prepared for an economic tremor as Italy prepares for a referendum. The Italian citizens would vote on changing resolutions to amend constitutions. This also involves absolving the power given to State, Parliament and Bureaucrats. The sale of Italian government bonds and securities has been on the rise anticipating the crisis. Italy currently has eight troubled banks currently that tank if the referendum doesn’t turn out in favor. Adding to the tension, Prime minister Matteo Renzi declared that he will quit if people vote against the resolution.
Impending market chaos:
The aftermath of the controversial referendum can be disastrous as Italy is one of EU’s biggest debtors. Owing to bad lending practices, the country’s borrowing has led to financial instability as many banks are under heavy pressure now.
Financial Times reporter Rachel Sanderson stated,
“Italy’s banks have €360bn of problem loans versus €225bn of equity on their books after successive regulators and governments failed to tackle a bloated financial system where profitability was weakened by a stagnant economy and exacerbated by fraudulent lending at several institutions.”
How the markets will react to this would surely be of interest for all global investors.
How Bitcoin will react:
If the Italian referendum goes sour, it could mean investors could turn to possible uncorrelated assets such as bitcoin and Gold. Just before the Brexit vote, Bitcoin spiked to $675. As soon as the decision became public, global stock markets began to plunge. However, gold and bitcoin values went up significantly as investors turned to safer hedges. Just one week before the vote took place, the San Francisco-based exchange Coinbase saw a 55% rise in British registrants. After the vote was out, it was noted that a 350% increase in UK sales of Bitcoin. Even during the fears of possible ‘Grexit’- Greece Exit, there was good increase of volumes of Bitcoin. Basing on these historical observations, it is very possible that we might see something similar during the referendum.