There is no doubt that COVID-19 has become the greatest disturbance of the year 2020. It has influenced almost each and every sphere of human activity, including those areas which seem to be independent from all this healthcare stuff. The Bitcoin market is not an exception, as coronavirus brings drastic changes to the dynamics of investments. So how does the pandemic influence the market of cryptocurrency globally? Stay tuned to discover everything you need to know about COVID-19 impact on investments in the Bitcoin industry.
The current situation has already been estimated as one of the greatest economic crises of all time. No wonder that the market of cryptocurrency has also suffered. Nowadays, there is an increased demand for a reliable bitcoin otc broker – as the crypto trading has become even riskier, investors need someone to have their backs to avoid financial losses.
So what happened?
For Bitcoin, things began to go wrong on March 12 – when the USA S&P Index decreased sharply. As a result, BTC price rates fell drastically below 4000$, which, of course, became a shock. That was the lowest rate of the cryptocurrency since March 2019 – prior to these events, Bitcoin was characterized by stable and constant growth. Thus, such a sharp decrease turned all the investors into a bundle of nerves. During the fall, BTC lost approximately 50% of its value. Even though the situation stabilized eventually and prices for the cryptocurrency increased to more than 7000$, the situation on the market is still far from being stable. No one knows what the next day will bring, as the pandemic is still raging.
What are the effects?
- Volatility Rise
The first and the most significant effect the Coronavirus pandemic has on Bitcoin is increased volatility. This is a statistical index that measures the dispersion of returns for a given security or market index. To put it simply, the higher volatility is, the less security is. As this measure shows the tendency in rates, it reflects how Bitcoin prices have become increasingly unstable.
- Liquidity Crisis
The sudden boom of coronavirus impacted the whole economic system around the globe. Even though we are not experiencing the crisis as for now, it is yet to come, as the events are uncertain. People are scared of what the next day will bring, and this brings panic. As a result, everyone tends to exchange their assets into cash – to get prepared for anything. Thus, the liquidity of any asset decreases – this happened with cryptocurrencies as well as with other securities and assets.
- The Most Stable Asset Though
However, BTC still has an ace up its sleeve: the main advantage of cryptocurrency in the modern-day financial market is that it does not depend on any factors directly. While the financial crisis is yet to come, and all types of assets experience hard times, Bitcoin manages to remain more stable as compared to other assets. As it was developed as a reaction to the financial crisis of 2009, the upcoming economic falls will be less challenging for it than for the rest of its financial assets.
Financial experts have different thoughts on what future awaits the world of cryptocurrency. Sankalp Shangari, renowned investor, predicts “a gradual rise in prices again, and more so post halving as some miners are capitulated (inefficient miners will have to shut down), but it won’t be much because the global economy itself is in one of the worst situations.”
However, it is questionable whether an increase in prices is a good sign for crypto investors. Forbes cites Philip Gradwell, the chief economist at New York-based bitcoin, crypto, and blockchain research company, who shared his vision of the problem in his blog. “ncreases in exchange inflows have proven to be a good indicator of increased volatility, so we recommend keeping an eye on the amount being transferred to exchanges.”
The situation is controversial, so the experts advise us to be careful. Hopefully, as the pandemic hysteria ends, Bitcoin will become as reliable asset for its holders as it was before. By the way, it is still a safe-haven and one of the most effective ways of investing currently as it does not correlate with traditional assets directly. Therefore, Bitcoin is one of the safest options for investments in 2020 – while its liquidity and volatility are at risk, compared with other assets (even gold!) BTC manages to operate effectively. Thus, the dynamics of investments in Bitcoin is rising, even though the overall situation on the financial market is far from being successful.