Technology

Impact of The COVID-19 Crisis On The Cryptocurrency Market

2 Mins read

Experts often suggest that cryptocurrencies are not amongst the safest of investment options. However, it can’t be denied that it is a potentially lucrative proposition for all investors.  Bitcoin was invented by Satoshi Nakamoto to create a system where financial transactions can be completed without relying on any financial institution whatsoever. The traditional currency can be referred to as an accounting system that is issued by a central body. On the other hand, as an accounting system, Bitcoin uses an open ledger for recording value and transactions. 

Cryptocurrency and The COVID-19 Crisis 

At the time of writing this article, the COVID-19 pandemic has already claimed over 20 million lives around the world. Naturally, we are staring at the probability of the world’s worst-ever global economic slowdown. 

In order to understand the impact of COVID-19 on the cryptocurrency market, it is important to see how the traditional financial instructions have responded to this crisis. It has been observed in the past that there has been a spike in the use of cryptocurrencies in times of social, political, and economical turbulence.  After the 2008 economic slowdown, there was a significant decline in people’s trust in traditional institutions, which acted as a catalyst for the invention of cryptocurrency.  In times of serious instability, this marked the beginning of people’s ever-increasing reliance on decentralized currencies. 

During the COVID-19 crisis, many consumers have felt dissatisfied and uncomfortable with the banking system’s lenience, relaxed insider trading precautions, and deprivation of liberty. This has also raised questions about whether the regulatory framework of the traditional institutions is actually a malleable structure where the institutions are only after presenting their own wills. 

After the COVID-19 crisis, there is a high probability that the mainstream financial sector will experience a severe downturn.  Millions of crypto users as well as investors around the world want to know whether this economic sluggishness will be mirrored by the cryptocurrency market. 

At the outset of the coronavirus pandemic, there was a panic in the market as investors wanted to quickly get rid of their stock. Naturally, this resulted in a decline in the price of cryptocurrencies. As we all know, cryptocurrencies are unrelated to the mainstream financial markets. Therefore, the initial fall of price was rather disappointing and surprising for the investors. However, since then, the prices have surged steadily. Right now, amidst a worldwide economic decline, cryptocurrencies have turned out to be a safe haven for the investors. 

Many financial experts in the US feared that the dollar value may collapse because of the crisis. In combination with the universal basic income issued to the citizens, this could lead to a serious economic disaster. The price of Bitcoin, however, increased drastically as soon as the US Universal Basic Income scheme was announced. This clearly indicated the uncertainty and lack of trust of the consumers in established financial institutions.

It is also believed that Bitcoin can be used effectively to safeguard the economy from inflation. In fact, due to the limited supply of both commodities, a comparison is often made these days between Bitcoin and gold. Therefore, despite the dichotomy between their digital and physical nature, both gold and Bitcoin definitely provide intrinsic value

In the COVID-19 scenario, the popularity of home-based work has skyrocketed all over the world. There is a high probability that long-term remote working will increase the usage as well as the importance of blockchain-induced smart contracts. 

Final Thoughts:

The price of cryptocurrencies is extremely likely to continue surging even after the crisis. The coronavirus pandemic has spared no corner of the globe. In developing countries without adequate economic provisions, cryptocurrency can act as a financial antidote in these troubled times and beyond. 

If you are an investor looking to find out more, feel free to seek help at xCoins.

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