The cost of Bitcoin in the auction on March 13 reached a record high of $61,000. Six months ago, the cryptocurrency was worth about 11 thousand dollars. Since then, its value has increased by 350%. Twelve years after its emergence, Bitcoin is more popular than ever. However, it is still not an acceptable means of payment and establishes itself as a reliable and stable currency.
Is it possible to give an unambiguous assessment of the impact of COVID-19 on the cryptocurrency market? Hi, this is Alex. I have been studying cryptocurrencies for almost six years, and I can confidently say that there is no clear answer to that question yet. However, the cryptocurrency market has become even more volatile during the COVID-19 period, and the pandemic isn’t over. But first things first.
Features of the Cryptocurrency Market During COVID-19
Governments and businesses have accelerated the adoption of blockchain in various spheres of life not to force the population to risk their health and go out on the street unnecessarily. For example, there is a trend toward its use in medicine.
The same China, which is the clear leader in the technology race, used blockchain technology to collect information on the needs of the city under quarantine. Thanks to the transparency of the system, authorities have been able to track the movement of goods and medicines, study cities’ needs, and meet them on time.
Also, there has been a noticeable increase in the popularity of digital currencies by central banks. The quarantine spurred states to accelerate new payment instruments that would not have a physical form. More and more countries have felt the importance of adopting electronic means of payment.
Cryptocurrency vs. Cash During COVID-19
During the quarantine period, when banknotes became as much a means of transmission as any other materials, the states’ leadership sounded the alarm and decided to popularize contactless digital payments on a mass scale. China is known to have destroyed several million fiat yuan simply because the banknotes came into contact with people infected with a coronavirus. In the case of cryptocurrencies, this is impossible.
Therefore, China has accelerated the pace of creating its cryptocurrency, and already in May, employees of city administrations in some provinces received salaries in digital currencies. Now Turkey, Germany, France, and some other countries are considering the launch.
Already today, we see an increase in Bitcoin futures trading volumes on the CME (Chicago Mercantile Exchange) and other cryptocurrency exchanges. Hedge funds that provide access to cryptocurrency investing for institutional investors have started to open in Canada and Europe.
What Happened to Bitcoin During COVID-19
Bitcoin began to appreciate noticeably in March 2020 after the coronavirus pandemic began. As the coronavirus spread, various governments imposed restrictive measures that led to a slowdown in business activity.
The second wave of the rapid growth of quotations began in the fall of 2020. In October, Bitcoin was worth about $11,000, and in December, its value exceeded $20,000. In January, the quotes exceeded 40 thousand dollars.
After that, the Bitcoin price returned to the level of $33,000, but there was a new jump in the rate in February. Trading was affected by the news that automaker Tesla had invested $1.5 billion in Bitcoin and accepted the cryptocurrency as payment.
The current growth in quotations differs from the situation at the end of 2017. Back then, cryptocurrencies were primarily bought by small investors from Asia. In 2020, Bitcoin began to be bought up by institutional investors and large companies, mainly from the U.S. and Europe. Transactions with significant amounts are registered on cryptocurrency exchanges, which may indicate the participation of large investors in the trades.
Bitcoin Market Prospects in the Post-Covid Period
The U.S. and the E.U. have decided to stimulate their economies with additional spending. Many investors believe the massive stimulus measures will weaken the euro and dollar. There are also fears that an increase in the money supply will accelerate inflation. Against this backdrop, investments in Bitcoins, whose collection is limited, have risen.
Also, experts and investors expect that the use of cryptocurrencies in the traditional financial system will increase. The decisions of individual companies indicate this. For example, earlier payment services Square and PayPal, which about 300 million people use, added the possibility of buying cryptocurrencies to their applications.
Morgan Stanley is also considering investing in Bitcoins. Mastercard plans to allow its cardholders to make transactions in some cryptocurrencies. Uber reported that the company has decided not to invest in Bitcoins but still considers accepting the cryptocurrency as payment.
However, questions remain as to whether cryptocurrencies have any value. Some experts still consider Bitcoin a bubble, the value of which will collapse sooner or later. Even investors, who expect growth in quotations, warn that trading in cryptocurrencies remains highly volatile, and we should expect sharp price fluctuations.
Studying the cryptocurrency market, especially in these volatile times, is a stimulating activity. But at the same time, it requires a lot of time and knowledge. Artex Global will help with the latter point. Our team consists of professionals studying blockchain and the Bitcoin market since its inception. Our blog is a treasure trove of helpful information for beginners and experienced miners. See for yourself by reading, for example, our guides on cryptocurrency exchanges: GDAX cryptocurrency exchange or Coinmama cryptocurrency exchange.
I have been studying cryptocurrency for over 5 years. I have accounts in every exchange and I test everything on myself.
I want this market to be more understandable for everyone.