What the Coronavirus Means for the Crypto Market
As the Coronavirus continues to wreak havoc on the global economy, there appears to be momentum gaining in the crypto market. This growth has led analysts to examine the effects of the global pandemic on cryptocurrency adoption and development. Interestingly, Covid-19 appears to highlight some of crypto’s best qualities.
For anyone who just returned from outer space, the world is currently in the grips of a global pandemic officially labeled Covid-19. This highly contagious virus is responsible for the largest economical depression witnessed in our lifetimes. The disease, which originated in Wuhan China spread quickly throughout the world.
In response, politicians were forced to make decisive decisions regarding the economy and public health. In many locations, the population has been under quarantine for months. As you could imagine, this lockdown has had a devastating effect on the economy with all major asset classes shedding 10%of their market value when the news became public.
A Glimmer of Hope
As expected, the quarantining of millions of people around the planet has led to a growth in the digital financial sector. People now see the benefits of not having to go out in public or be around possibly infected individuals. In most instances, it’s now the only option for many normal tasks.
Additionally, institutions can now see the power gained from a digital-only approach to the financial sector. It took a while but banks finally understand the importance the digital economy plays in the lives of millennials and all of the younger generations posed to inherit the planet. Luckily the demand for these services is obvious.
This stream of new users into digital platforms is easily monitored via traditional financial metrics such as stock market volume. Over the last 3 months, businesses that focus on data, remote working, encrypted communication, online education, and sustainability all are now experiencing growth.
Additionally, there was an uncoupling of cryptocurrencies from the traditional markets. Bitcoin and other cryptocurrencies continue to undergo appreciations in market value over the last couple of months. There were many reasons for this change. Primarily, cryptocurrencies such as Bitcoin are now considered a reliable store of value by many people.
Critically, a complete lack of trust in the capabilities and sustainability of the traditional financial system continues to fuel further adoption. Governments around the world were caught off guard by Covid-19 slamming their economies to a halt. In the melee that has followed, governments have begun to issue billions in fiat currency to their populations. Analysts foresee this huge influx in the currency as a flashpoint for an upcoming financial depression.
Why Crypto is a Smart Asset during these Times
One of the biggest draws of cryptocurrencies such as Bitcoin is their lack of an association with any government. Placing your holdings in a neutral asset has been a long time strategy of the wealthy dating back thousands of years. Gold was the original global currency in modern times.
For example, someone who held million in Iraqi dinar prior to the Gulf war would now be penniless if they didn’t convert their notes over to some other asset such as gold before the collapse of that government. While there isn’t a major global conflict underway, there are huge waves of doubt within the public as to the government’s ability to maintain control during these troubled times.
The reason why people trust in gold’s value is simple. It fills all the roles of currency. Also, no matter who was at war, you could hold your wealth in this non-partisan asset and when the war was over, you were still rich, regardless of what side was victorious. The same goes for today’s pandemic, albeit a slightly different scenario. A growing lack of trust in the leadership abilities of officials drives savvy investors into other asset classes not harmed by the performance of a government directly.
Better than Gold
Many people see the cryptomarket as a better option than investing in gold nowadays, primarily because most gold investors don’t actually hold any physical gold. Unlike cryptocurrencies, paper gold systems are highly centralized and investors and the market must trust the platforms to honor their commitments.
Blockchain technology eliminates this reliance on third-parties making it more secure. Instead, transactions are conducted in a peer-to-peer fashion. This strategy is more akin to handing someone a piece of gold, rather than a paper saying you own gold. The value of a cryptocurrency is the digital asset itself unless it is a token that represents some other real-world asset.
Today’s Gold is Digital
Another important point to consider is that physical gold would be impossible to utilize in today’s global economy. Could you imagine pulling up to a McDonalds and attempting to chip off $3.59 to pay for your meal? Cryptocurrencies are the smarter alternative moving forward because they can serve both the micro and macro economies.
What Does the Coronavirus Mean for Cryptocurrency moving Forward
The Coronavirus appears to have shined the spotlight on these unique financial instruments. Thankfully, the pandemic came at a time when cryptocurrencies such as Bitcoin and Ethereum have maintained their blockchain for close to a decade. This record of unbroken trust continues to make the crypto market an appealing option for Today’s investors.
You can expect to see the blockchain sector continue to experience record growth for years to come. The benefits of this technology are just too great to deny. That being said, the path to large scale adoption is filled with volatility.