The onset of the novel coronavirus, or COVID-19, has become the defining event of 2020 and 2021, affecting all walks of life as national authorities scramble to control the worldwide pandemic. The effect on financial markets has been dramatic and damaging. But, for cryptocurrencies, there is something of a silver lining.
Is it possible that this rise in prices at a time when most other investment options look unprofitable is because Bitcoin is becoming a safe haven?
Bitcoin is far from becoming a safe haven like gold or silver, even though its current trajectory looks similar. These are monumental changes in the underlying and will only change if the Fiat system itself is under threat. There are various narratives surrounding Bitcoin, but the biggest one still remains the fact that most volumes are due to trading. Some would argue it is gambling of sorts, while some will see a move towards digital gold. The US FED & government has been pumping in billions of dollars into the economy. As long as the dollar remains strong, it will be difficult for Bitcoin to replace that. However, I am a strong believer in the BTC Digital Gold notion and the way governments are indiscriminatly pumping Fiat, a Gold and BTC could play a crucial role - an international currency of sorts.
Coronavirus exposed the weakness of traditional financial instruments (USA printing 3 trillion dollars. Keep in mind, that at a peak the crypto market had a total of 2 trillion dollar market cap), however, crypto has proven surprisingly resilient. As a result, BTC and other cryptocurrencies have seen their investment values rise and enjoyed more attempts at their mainstream integration.
About 20 per cent of all US dollars were created this year.
The Federal Reserve has printed unprecedented amounts of money to support the coronavirus-stricken economy. It has sparked debates about inflation and helped asset prices like cryptos soar.
Almost a fifth of all us dollars were created this year
What is in store for Bitcoin, once the world economy slowly recovers?
Coronavirus has had a huge effect on the nascent industry of crypto currencies. We were already dealing with various issues, like regulations, liquidity. scams etc and this has just added to the list of worries. However new companies are building a lot of interesting products but there is still a lot of ambiguity surrounding Bitcoin even today. Though it can fairly be called a mainstream asset now, it is yet to be institutionalised. Governments all over the world need to take bold measures to regulate it and make it easier to BUY / SELL / HODL Bitcoin. Till that happens, the crypto industry will continue to struggle amid all the uncertainty, which has been further highlighted by Corona situation. Hopefully, few years down the line, the change in narrative will be more of a positive one.
Conclusion
While it remains to be seen what the impact of future regulations and state digital assets will be, the COVID-19 crisis has proved one thing — cryptocurrency isn’t going away, and is in fact on track to become a more central part of the global economy than ever before.
LINKS
Cryptocurrency and COVID19: How the crisis made a clear case for crypto
No comments:
Post a Comment