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Impact of COVID-19 on Cryptocurrency

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For past 5 months, the world has been dealing with something it has never seen before in recent history. The notorious Covid-19 pandemic is engulfing every aspect of life. People are uncertain of the future as many countries have gone under partial or full lockdown. Financial markets are the worst hit by the Coronavirus disease. The global economy is nose-diving as businesses are unable to operate due to social distancing measures. In these testing times, many experts are predicting some structural changes in the post- COVID-19 world. The rise of crypto is one of them.

Introduction to Cryptocurrency:

The cryptocurrency market provides an alternative to traditional financial markets. It consists of virtual tokens such as Bitcoin (BTC), Ripple (XRP), Ethereum (ETH), and Litecoin (LTC). They are traded in cyberspace. No physical or material barriers can constrain Being a digital currency, crypto is not constrained by any sort of physical or material barriers. This and many other advantages make cryptocurrency a lucrative spot for investment during a global crisis.

Bitcoin and other crypto trading coins have been around for quite some time now. However, the recent COVID-19 pandemic has made investors take a special interest in it. Here are three reasons why investments in crypto market will surge in the post-COVID world.

The ‘New’ Gold:

The goal of investing in stock markets or trading assets is to maximize profit. Everyone wants to make money and protect their earnings. As a result, investors are constantly searching for safe havens.

A safe haven in economic terms is an asset or instrument which protects the investment. It is also expected to increase in value during uncertain times. Gold has long held the status of a safe haven. Being a protective asset, gold has passed successfully through many global crises. However, now Bitcoin is out there as a competitor.

Many see Bitcoin as an effective safe haven. Unlike gold, it doesn’t depend on transportation or logistics. We can easily trade Bitcoin with speed and transparency thanks to the blockchain revolution. Additionally, it has a completely decentralized system and weak connection with traditional market trends. Consequently, it’s worth taking up during a global economic recession.

Correspondingly, Bitcoin is the ‘new’ gold, a digital one.

Lockdown is Crypto’s Friend:

No matter where you are, lockdowns around the globe must have impacted your life. This measure of curbing coronavirus is making physical currency exchange inconvenient. Thank the lord for digital currency in this testing time. You can remotely make transactions without physical contact with people or potentially virus-infected banknotes. Ultimately, cryptocurrency demand has also increased following the spread of COVID-19.

Crypto isn’t adopted at a mass scale. However, many financial experts are hopeful of its good prospect in the future.  The German Deutshe Bank Stated through the official account on twitter:

“The COVID-19 pandemic is accelerating the rise of central bank digital currencies as many governments see the handling of cash as a potential risk factor. This will likely add to calls to move towards digital cash, according to our Deutsche Bank research colleague Marion Laboure.”

Another reason for the Crypto market’s upward swing during a pandemic is the nature of the workforce. In an interview with Express Computer, Nicolas Cary (Co-Founder & Vice Chairman at Blockchain.com) said that employees of the crypto industry are far less affected by the lockdown. Most workers can aptly work from home as most jobs are related to software development.   Henceforth, Crypto industry productivity and revenues have been relatively less impacted than other sectors of the economy.

It is quite apparent that lockdowns have paved the way for digital currency’s massive use.

Key to Secure Future:

Crypto money cannot be subjected to manipulation. The rules and regulations of the cryptocurrency market do not allow anyone to control it. The governments can’t have hegemony over crypto transactions, nor can any third party access the financial statements of investors.

In the past, hackers have been able to obtain personal data including credit card numbers of consumers through online systems. These breaches have impacted both individuals and financial institutions. Fortunately, we have cryptocurrency to save us from hackers. Brian Armstrong in Project Syndicate wrote:

“Cryptocurrencies hold the promise of creating a more open financial system, with worldwide access, instantaneous fund transfers, lower costs, and vastly improved consumer-privacy protections.”

Covid-19 has made it difficult to trade internationally and transfer logistics. Governments are also considering the option of using digital currency for the transfer of funds. This will be fast and free of intermediaries, thus saving both time and cost. The cryptocurrency revolution is the call of future.

The biggest concern, so far, with crypto, is that many criminals use it for stashing their illicit money. For countries thinking about cryptocurrency policy, the best approach would be striking a balance between law enforcement, cybersecurity, privacy, innovation, and economic competitiveness.

Conclusion:                                                                                      

The graph of crypto’s popularity is going up and up. Investors around the globe are submitting to the ‘new king’. Every structural or systematic change in the past two decades has brought us one step closer to the crypto revolution. Covid-19 is no different. It led to the advancement of investments in cryptocurrencies.

As the other side of the traditional financial market, the crypto market will be extremely important in the post-COVID world. In the words of Tim Drapper:

When the world comes back, it will be bitcoin, not the banks and governments that save the day.”

Follow our blog for more news and analysis on cryptocurrency.

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