Coronavirus pandemic’s impact on cryptocurrency market – Everyone has been talking about how the pandemic has impacted the financial and technical realms, but no one is yet sure about its effects on the crypto market. The question that arises in such a situation is that when the stock market has been unstable, why did investors not opt for blockchain-based assets?
The coronavirus pandemic hit the world suddenly and while we are not all in the throes of an economic crisis now, but the initial shock had definitely caused a liquidity crisis. In such situations investors make a bee line to liquidate their assets to cash. So, all assets have suffered as a result of this development, including the so-called safe havens such as gold. Even crypto assets like the Bitcoin had crashed initially although it was claimed that this was not related to the other assets. However, with the coronavirus crisis it once again became clear that banks can print notes and increase the supply. In the crypto world, the demand supply relationship is predefined.
The crypto market has always been notoriously volatile and things were no different with the coronavirus pandemic under way. When the WHO declared the Covid-19 as a pandemic, prices of crypto assets automatically fail right afterwards. This happened between mid-February to mid-March and the Bitcoin market cap also dropped to less than $4,120. Even the Ether value fell during this time as did the Ripple network. So, both digital assets and stocks started to fall in value. However, bots like Bitcoin digital help the young investors move forward with the trade and earn profit on a daily basis.
However, in spite of the fact that the crypto coins had plummeted in value, they continue to be the best-performing assets today. People are noticing the vulnerabilities of the traditional monetary system and losing trust in bank policies. In fact cryptocurrencies had started making an appearance only after the big economic crisis in 2008.
The biggest reason to invest in digital currencies is because it has a low co-relation to traditional assets and this makes crypto coins perfect portfolio diversifiers. Allocating about 5% of crypto coins to a traditional investment portfolio can bring better returns. Earlier, retail-driven individuals were mainly investing in cryptocurrencies because they believed in an intermediary-free world but nowadays many high-net worth people are also turning crypto investors. Recent developments like German crypto custody licenses and European AML directives are the first signs that cryptocurrencies are being considered bankable by people.
The pandemic has given the biggest scare to economies and markets and many businesses have been forced to discontinue their operations. This has obviously led asset values to fall. Digital currencies have been impacted also, plummeting in values and moving south just as traditional assets and fiat currencies. Analysts who had thought of Bitcoin as a safe haven had been initially disappointed as its behavior resembled that of stocks and prices also feel in the same way as did the stock prices. However, this development may be looked at as being a short-term occurrence.
It is believed that cryptocurrencies will continue to be in demand after the pandemic is over. More and more investments in blockchain-based financial tools are expected as time goes by. What is making the difference is the fact that the world is now more technologically-intertwined than ever before. Today, people are working remotely; buying assets online; and purchasing digital currencies unaffected by limitations of traditional currencies. Before the Covid-19, digital currencies had been maturing at a rather slow pace but now, decentralized currencies can become the order of the day at a time when familiar ties get disrupted and upended.
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