COVID-19 has caused a sudden health crisis that has impacted countries worldwide. Countless people are affected by this virus outbreak and the impact can be seen on stock markets and world economy. Not to forget that the cryptocurrency market also saw a huge downward fall because of this. Starting from the leading cryptos to still growing ones, all digital currencies in the cryptosphere experienced the worst one-day drop in years. Although, the crypto market has started picking up the pace as compared to the stock market and world economy.
According to the World Health Organization (WHO), the number of newly reported cases of COVID-19 in the rest of the world has exceeded new cases in China. As a result of this, crypto traders and investors were facing the volatility of the digital currency market. Analysis and discussion of Coronavirus’ effect on digital assets, especially Bitcoin, started earlier this year. Talks about this started when many surmised that the China-originated virus was one among the reasons for Bitcoin’s rise. The price of BTC reached over $10,000 in February this year.
On 13th March, the crypto market saw its biggest one-day drop. Bitcoin fell from $7,798 to $4,121. Other cryptos such as Ether and Litecoin also tumbled by about 12% and 8%, respectively.
How the Coronavirus Infected Crypto’s Investment Theory?
The advocates of cryptocurrency always argue that these currencies are ideal safe havens from the uncertainties of the broader financial market. It has a fixed supply and has got strict rules for releasing new tokens in the market. They are free from the regulation of central banks and government. Earlier, whenever any event caused tension in the financial markets, the crypto market was seen soaring.
However, the emergence of coronavirus made a plunge in the prices of BTC and other digital currencies seemed aberrant. Many financial experts said that this downfall was caused as cryptocurrencies have lost their status of safe haven and are once again recognized as a risky asset. This could have led to be a big blow to crypto’s idea being the safe alternative to fiat currencies. But today, the digital asset market is starting to get on the right track and is seeing a hike.
Rise of Crypto market Amidst COVID-19
In February 2020, the chief executive of Altcoin Fantasy, Cynthia Huang told a crypto magazine that a story was being passed on in the cryptosphere and beyond. The narrative was that due to mishandling the situation of Coronavirus by the Chinese Government, mistrust increased between its citizens and the administration. This led people to shift their money to what they considered a financial safe haven, especially Bitcoin.
Bitcoin and other cryptocurrencies have already taken traders on a roller coaster ride since its inception. It had plenty of downdrafts until now, but at present, when most people would have thought the crypto will escalate in this global pandemic, the market saw a great dive in the price. However, the market is rising again which cannot be said for the stock market.
As a matter of fact, speculators and analysts of crypto have assumed that as the market has picked up, it will continue to do so. They believe that the spread of this virus is making people move their assets from fiat currencies and other markets into the digital assets, especially BTC. As a result of this, the price of all the cryptos in the market including Bitcoin will continue to increase.
Even if this was not the reason, speculation from other markets surrounding the outbreak virus might have led people to buy Bitcoin and other digital assets in an attempt to make a quick profit. Peter Schiff, well-known BTC skeptic, mentioned a similar phenomenon on Twitter that followed the US-Iran tensions at the start of this year.
The year 2020 is largely dominated by the Coronavirus pandemic with governments and citizens fighting a battle for their lives and livelihoods. The virus started from China and has currently spread throughout other countries like Iran, the United States of America, Italy, India, and other 200+ countries. This has affected the whole world economy and has plummeted the stock prices with no certainty of profits on the horizon. In March when the scope of COVID-19 was rising exponentially, the crypto market experienced a plunge and many investors saw this as an opportunity to invest in the market. Currently, the market is still volatile but has seen a steady and constant upward movement even in this unpredictable pandemic. This has proven the resilience of the cryptocurrency market despite the downgrading world economy and the nation-wide lockdowns that bought businesses to a complete halt.