No doubt, the coronavirus pandemic has greatly impacted our daily lives, limited our ability to interact with others and it wreaked havoc on our financial structures and security. COVID-19 has caused fear and anxiety to spread like wildfire among investors and businesses.
At the onset of the pandemic, all hell broke loose in the financial markets. Many enthusiasts believed that crypto was a safe haven because it differed from traditional assets like stocks. However, cryptocurrency proved to be just another asset when it began to decline right along with the stock market. In March bitcoin was down by forty percent.
The anomalous coronavirus-inspired plunge caused a knee-jerk reaction from many investors. Financial experts gathered that cryptocurrencies had essentially lost their safe-haven status and were once again perceived as a risky asset. That’s inconsistent with the basic investing thesis many crypto investors have in justifying their bitcoin holdings, and if it’s true, it would potentially be a big blow to the idea that bitcoin offers a safe alternative to fiat and assets that are tied to those currencies.
"While there are not many things to be optimistic about now, cryptocurrency and blockchain technology may be the exception."
What’s ahead for bitcoin and the cryptocurrency ecosystem?
The problem that bitcoin and other cryptocurrencies face is that there’s no single reason why investors choose to own them. Some see bitcoin as a legitimate alternative to fiat currencies, but others simply speculate that they can buy bitcoin low and sell it high, with the primary goal of increasing the value of their dollar-based portfolios.
As long as risk-sensitive speculators are heavily involved in the bitcoin market, cryptocurrency investors can expect to continue seeing violent price swings — even for reasons that don’t seem to make sense. It’ll take a more concerted effort to unify bitcoin users with a common purpose in order to smooth out the cryptocurrency’s price action going forward.
Cryptocurrency Recovery and the Future
If you had invested in bitcoin when Covid-19 was roiling financial markets, you would have more than doubled your money by now when the value of bitcoin soared past $10,000. Some other alt coins such as Ethereum, Ripple and Cardano have also been on a tear. Stock markets have shot up as well, but their performance pales compared to the best performing crypto assets. Covid-19 has made crypto hot again.
The go-to for speculators and investment mavericks, crypto assets, are moving higher up the radar screens of commercial banks, hedge funds and other institutional investors. But perhaps most interesting of all, some of the world’s central banks are warming to the world of crypto. While they have always watched the space with interest, the Covid-19 pandemic has created a greater sense of urgency for them to act.
The limited supply of Bitcoin, and the way it operates independent of—recently faltering—government hands, is appealing as a store of value that may not only make it through this crisis intact but actually emerge better off. And it’s not just Bitcoin.
The cryptocurrency industry has grown into something different altogether in its eleven years of existence. What started with a solitary digital asset has turned into a flourishing ecosystem. The appearance of Litecoin, the second cryptocurrency, in October 2011 started a revolution in the crypto world. Then the launch of Ethereum, the altcoin giant, kicked things into another gear. Now we have Cardano, a third-generation cryptocurrency which could change how the world banks and votes. A self-sovereign economy.
While the future is anything but certain, the decisions that are made now could have long-lasting effects. The post-virus world is certain to be a very different one, as we will have to redefine social and economic norms. Many people are using the downtime caused by the current pandemic for self-reflection and reassessment of their finances.
