The deep impact of COVID-19 has been felt across all economies. Ever since the global outbreak, the number of cases and deaths has been climbing consistently bringing many industries to a complete standstill. Naturally, the volatility of investment markets has been brought to the forefront with the global stock market responding negatively to the spread of the pandemic. Amidst the global economic conditions, how can coronavirus affect Bitcoin? Let’s find out!
Blockchain and cryptocurrency also have not been spared and this can be seen in the coronavirus effect on bitcoin, at least in the initial phase. But, in what manner does a global pandemic crisis, the size of COVID-19, impact the cryptocurrencies? Alternatively, with traditional markets suffering and governments unable to successfully contain the pandemic’s impact on the economy, are people seeing cryptocurrencies in a new light? The recent surge in cryptocurrency prices and positive developments pertaining to regulatory compliance has brought cryptocurrencies closer to mainstream adoption.
Here, we seek to address the questions along with the possible future of cryptocurrency in a world that is transforming faster than ever.
COVID-19 Effect on Cryptocurrency
Like the rest of traditional investment markets, the cryptocurrency markets also suffered severely from the initial impact of COVID-19. At that stage, the world was not affected by a financial crisis. Therefore, the cryptocurrency market crash was a direct result of the liquidity crises created by investors.
Nearly all financial crises of the past were first impacted by investors panicking and converting all of their liquid assets into cash. The coronavirus pandemic started escalating all across the globe from the last week of February. Subsequently, this impacted the cryptocurrency market with investors selling their cryptocurrency tokens. The price of Bitcoin was around $9000 in the first week of March dropped to $4800 in a span of 10 days.
Bitcoin has often been referred to as the ‘digital gold’ meaning that like physical gold, bitcoin can also be held onto for its value stores. However, this has not stopped investors from questioning the perceived notion of cryptocurrency as a safe investment haven. Moreover, the drop in prices was not restricted to Bitcoin. Other prominent cryptocurrencies including Ether and Ripple also suffered by dropping more than half in their value.
