Impact Of Covid-19 On Cryptocurrencies

By November 16, 2020November 19th, 2020No Comments
Impact of Covid-19 on cryptocurrencies-WazirX

Both the financial and business world has suffered a major impact due to the rapid spread of the novel coronavirus. With businesses closing down around the globe and unemployment reaching its peak, we are slowly proceeding towards a worldwide recession. But the crypto industry has received mixed responses, with more and more people opting for cashless methods for transferring and storing value. This has added a solid impetus to the adoption of digital currency around the globe. 

However, the mining of cryptocurrencies has also been adversely affected by the virus wreaking havoc in Asian countries like South Korea and China, which hold the lion’s share of the overall mining power. Such changing dynamics have left crypto investors utterly confused. But we are going to clear some common confusion by offering a brief overview of the impact of COVID-19 on the crypto market so that you can make the right investment call.

The investment markets have become highly unstable amidst the uncertainties of our economy and pandemic-related lockdowns. This has impacted every single sector ranging from precious metals and stocks to collectibles and even cryptocurrencies. Crypto aficionados were especially interested in seeing Bitcoin’s performance in such circumstances because the numero-uno crypto was devised to protect investors in such tumultuous market conditions. People could buy bitcoin India as a safer haven compared to the highly depreciating government-backed fiat currencies. But COVID-19 presented the global crypto community with an unexpected turn of events, and that is exactly what we are going to talk about today.

Bitcoin’s Performance During The Initial COVID-19 Crisis

The price of Bitcoin rose consistently, ranging from the end of 2019 up to January 2020. At this time, COVID-19 had already hit China, although it hadn’t taken the shape of a global pandemic. People could be seen queuing up to buy cryptocurrency in India and other parts of the world for parking their funds under a safe investment cluster. As February drew closer, the world had to come to terms with coronavirus when China announced self-quarantine. Graphic videos of infected people being dragged out of their houses started going viral. At this particular point, the crypto market showed a bearish trend with more and more people selling off Bitcoin. This caused its price to reach the $9000 mark and remain stagnant for quite some time.

Bitcoin’s Price Crash

The pandemic nature of COVID-19 was announced by the World Health Organization on 11.03.2020. Panic waves across the globe followed this. People started selling stocks and precious metals while stocking up on cash, groceries, and other everyday essentials. With the price of Bitcoin coming down by 60% to $4000 levels, this premier crypto experienced its foremost “Black Swan” event. But this massive price surge also lured in a separate category of investors who have been waiting in the side-lines to avail Bitcoin at a heavily discounted rate. Bitcoin’s price stabilized a little over $5000, and very soon, the crypto started moving towards its recovery phase, which was comparatively faster than peer investment markets. 

Bitcoin’s Price Recovery

While Bitcoin has experienced massive price volatility right from the time of its incubation, nothing could be compared to its price crash during the initial months of the pandemic. From $11000 in January, Bitcoin reached sub $4000 level, and this made even the biggest Bitcoin supporters reconsider their decision to hold this crypto any further in their portfolio. But Bitcoin started riding towards the path of recovery by proving everyone wrong. The biggest loser of this pandemic blow remains to be the stock market, which plummeted down by 30%. 

Current Standing Of Cryptos

Cryptocurrencies like Bitcoin are free from governmental controls and have established rules for dealing with inflation. Such attributes make these digital currencies an excellent hedge even in the situation of market collapse.  The rapid spread of pandemic has also added to the use of blockchain technology coupled with mistrust of people in traditional systems of finance. The safer and more efficient blockchain technology offers accountable means of resource distribution. This is why numerous NGOs and government bodies have been implementing this technology for keeping tabs on the COVID-19 situation. 

Certain governments are encouraging non-cash modes of payment to manage the COVID-19 crisis effectively. Investors usually relied on cryptocurrencies as a store of value before the contagion. But now it is increasingly being used as a medium of exchange coupled with the paradigm shift in demand towards cashless payments. Increasing usage has also led to more probabilities of crypto fraud as several families have lost their income source due to the COVID-19 pandemic. Under the Twitter Bitcoin fraud, around 130 high-profile crypto accounts were hacked.

The Indian Scenario

The Indian Supreme Court has directed its Central Bank to lift the ban imposed on cryptocurrencies. This has induced a ray of hope amongst the Indian stakeholders of the crypto sector. The global crypto market’s capitalization during the early months of 2020 amounted to USD 261 billion, which marked an increase of 70 billion USD starting from the onset of 2020. India’s economy was booming during the 2017-18 period, but its incremental GDP still lagged behind the current year’s total market capitalization by USD 15 billion. This number proves that the global crypto market is advancing at an exceptional pace irrespective of the pandemic. 

Final Words

The Chinese government is currently funding local crypto champions and pushing different blockchain projects to prepare for a seamless flow of transactions. Nations like Russia and Iran are also doubling their cryptocurrency efforts while leveraging on the current geopolitical climate. Mark Carney, the Bank of England’s governor, has recently announced a Synthetic Hegemonic Currency on similar lines to Facebook’s Libra crypto coin. This is being seen as a potent alternative to the traditional dollar. The crypto sector has received a healthy influx of both institutional and individual support before the outbreak of the COVID-19 pandemic. The crypto interest also spiked significantly in the months following the lockdown as people wished to exercise greater control over their asset holdings.

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