Will the cryptomarket be impacted long-term by the global pandemic? Is Bitcoin immune to the Coronavirus?
The COVID-19 pandemic has, among other things managed to throw a monkey wrench into the gearbox of the world economy. Some experts claim that it will take years, if not decades, to recover from the screeching halt it caused globally. Everything, from education to travel, has been put on hold. Billions of people have spent months in quarantine, unable to go to work or earn.
The financial markets are being hit the hardest. The S&P 500 index is at its lowest since the 2008 meltdown. However, everything isn’t as bleak as these facts would suggest. There is some silver lining that can prove quite beneficial to the world economy. One of those is the effects these events have on the crypto market.
COVID-19 and cryptomarket
There is a slow, but steady trend of people increasing trust in cryptocurrencies to the detriment of traditional investments like stocks, real estate, and even gold. The COVID-19 pandemics has drastically increased this tendency. The biggest beneficiary of this will be Bitcoin, but all other cryptos stand to gain a lot, once the dust has settled. This is to be expected, as Bitcoin was founded partly as a response to the 2008 financial crisis. As we are officially in recession, it is only logical that it will gain in value in the future.
Is cryptomarket immune to the coronavirus?
As COVID-19 continues its rampage across the globe, European stocks have reached the lowest point since 2012. The disruption of the supply chains, rising unemployment, and uncertain prospects have caused world markets to shrink to dangerously low levels.
All this has forced investors to seek low-risk vessels for their capital. As we have seen, traditional investments have been losing ground to cryptocurrencies, as their profits have been a tempting alternative. While these claims have yet to be proven true, it is clear that the cryptomarket may very well be immune to coronavirus.
Increased interest in cryptocurrency
With rising risk attached to fiat currencies, we are witnessing a surge in interest for cryptocurrency coins. People are trying to learn more about them. This increasing interest generates a lot of attention and is positively affecting the value of crypto markets, as more and more people are getting involved.
The role of the cryptomarket in a post COVID-19 economy
According to the Deutsche Bank, the COVID-19 pandemic may very well be a critical point for the adoption of digital currencies. The true extent of the effects the pandemic will have on the global economy is still unknown, but cryptos will definitely benefit from it. Many central banks see cash as a potential danger, which will force them to hasten the adoption of bitcoin and other cryptocurrencies.
Abandonment of fiat currencies
The abandonment of fiat currencies will in short term destabilize the market and increase the use of digital currencies, creating a spiral that will lead to wide-spread adoption of digital cash. As with all new technologies and ideas, some will not adapt as fast as the others. This alone will create instability in the system, but in the long run, it will smooth out, a majority of banks come on board with the idea. Some of them have already started issuing their digital currencies, a trend that will be massively followed in the future.
One of the main reasons for the popularity of cryptocurrencies is that they are immune to government manipulation we often see in fiat money. That doesn’t mean that the market itself can’t be manipulated, but at least it isn’t left on the mercy of some power-hungry politician.
The lack of government regulation, however, won’t last forever. EU has already issued directives to its member-states on new regulations and some, like Germany, have put them in practice. The others will follow suit.
Some investors, like Tim Draper, go as far as to claim that the crypto market will play a more important role than banks or even governments in the post-COVID-19 world.