While wealth production in the world will decline seriously in 2020, the price of cryptocurrencies seems to be behaving well. But why is that?
If we look at the two leaders of the cryptocurrency market (Bitcoin and Ethereum), we see an increase in prices over the first 7 months. Here is the price of bitcoin for 1 year. Let’s focus on the last 7 months.
We note that despite the panic effect associated with the coronavirus, Bitcoin has resisted well over the medium term. The same goes for Ethereum. Even if the release of Ethereum 2.0 could suggest that these performances will be better. However, all this remains hypothetical.
Why such an increase despite a tense economic, political and health climate? This is explained by several fundamentals:
- The monetary policies of the states cause fear of a deflation of the currency and therefore potentially a loss of savings and purchasing/investment power.
- Decentralized finance (DEFI) is developing rapidly. These applications are becoming very concrete and multiplying.
- Global legislation continues to be increasingly positive towards cryptocurrencies.
- The general public and professionals no longer consider cryptocurrency as a toy for geeks but as a real monetary tool.
- Innovation continues. It is even accelerating. This suggests that the potential of these technologies is enormous. This potential is only beginning to emerge.
- The economic crisis stimulates asset diversification. Cryptocurrencies have seen new players enter the market.
- Cryptocurrencies are theoretically better designed to withstand a possible monetary crisis, which reassures investors about its future value regardless of the outcome of the economic crisis.
