Here we will be discussing the impact of coronavirus on cryptocurrency. Coronavirus has devastated almost all the business in the world. The biggest economies have collapsed. It affected trade adversely. There is hardly any country or business which was safe during this pandemic.
Lockdowns were imposed. People were restricted in their houses. No one could come out. No one could go in. Offices were closed. The importing and exporting of goods also stopped. But you might want to know that did this pandemic impacted the cryptocurrency as well? You will find the answer to this question in this article.
One must know what was happening in the world when this pandemic started suddenly. Investors liquidated their holdings. Every asset class suffered due to this pandemic. Gold, which is considered a safe-haven, also suffered a fall of 10%.In such extraordinary times, crypto assets also crashed besides being non-correlating to the other assets. Unlike cryptocurrency, banks can print fiat currency.
In cryptocurrency, the code is the law. The relation between supply and demand is predefined. The investments of institutional money in crypto assets are seen to be increasing. It is the top priority of central banks around the world that they want to introduce blockchain-based US dollars or Euros. Libra has its weaknesses but still considered as a solid backbone for the digitized currencies and can also help in the acceleration of development.
Performance of cryptocurrency during the pandemic:
At first, corona caused a liquidity crisis instead of an economic crisis. Cryptocurrency assets crashed like all the assets of other classes. People wanted to convert all their liquid assets to cash so they could prepare themselves for a crisis. Even though the crypto market tanked more than the commodity and stock markets, still we can say that it is the best-performing asset as compared to other class assets.
Cryptocurrency is famous for having huge fluctuations in their prices.
CoinMarketCap tracked a fall in the total market value of different digital currencies. The fall tracked was from the US $308 Billion to less than US $118 Billion. The world’s largest digital currency bitcoin dropped from the US $10,400 to less than $4,120. Other digital currencies also suffered a fall. Ether being the second-largest digital currency fell 66% in the first month of the crisis. Ripple network’s digital token XRP also felt a similar drop of 66% in its value.
Impact on crypto mining:
China and South Korea own more than 70% mining power of bitcoins. So, initially, the spread of the virus in Asia produced a massive effect on the mining power. A lot of crypto mining equipment has been made in the past couple of years. Due to the sufferings faced by their prices, this equipment may have certain inefficiencies. Due to the ineffectiveness of this equipment, the mining farms are becoming critical.
The main reason behind this was the lesser movement of employees into the mining farm. The cryptocurrency market is considered safe by many experts. It is a good option for long term investments because the values are growing continuously. This pandemic made people stay home like never before. Online gaming became more popular globally. This massive adoption of online gaming might give rise to the usage of digital currencies in the game.
There has been a substantial impact of coronavirus on the financial economies and the global economy. This ongoing pandemic has forced many people to shut their businesses. An increase in poverty is observed. We can see that the asset values associated with any class are starting to decline. Similarly, a decline is seen in digital currency values just like other traditional assets.
A large number of analysts consider Bitcoin to be safe. But this perception is affected by the fall in the values of digital currencies just like stocks. This can be said that the same movement of crypto asset values in the direction of stocks may be temporary. But still, we cannot neglect it.
This was the impact of coronavirus on cryptocurrency.