On March 13th, something happened to the cryptocurrency markets that was not expected. Bitcoin had the largest single-day fall losing more than 40% in a matter of hours. What precipitated this fall? You may have guessed it… COVID-19. It is a novel respiratory infection belonging to a group of Coronaviruses first discovered in December 2019.
The infection, which originated in China, has spread across the world infecting more than 1 million individuals and killing over 50,000 according to reports as of press time. This disease has caused general fear amongst the global population leading several people to opt to work from home. Businesses have been closed while some of those that are still running, have opted to do so with a fraction of their usual workforce.
Expectedly, the global economy has taken a hit including the equity markets. Trading floors are empty. Amidst all this panic which began in January, several cryptocurrency investors may have assumed that the virtual market may be able to benefit from this pandemic as governments sought to encourage digital payments over the use of physical cash.
Bitcoin has also in the past shown some independence from the traditional markets allowing digital asset investors to hedge their investments with a portfolio allocation of Bitcoin and/or other popular cryptocurrencies. But, no one expected that Bitcoin would fall due to Coronavirus since that seemed to be the direction the traditional markets were taking.
However, Bitcoin did fall and so did the rest of the cryptocurrency market. This proved that cryptocurrency markets may not be immune to extreme market corrections. Since March 13th, Bitcoin has, however, rebounded more than 75% with more upside to go. Most of those who sold in the market panic got an opportunity to buy lower and most bought even more than they had before. This is great news that has gone largely unreported by mainstream media. It is worth noting that despite the value correction of Bitcoin, it still has a role to play in the fight against Coronavirus. This means sensitizing the public on cryptocurrencies – their uses and technical properties.
The information is important for people to know the benefits of cryptocurrencies in events like the one happening worldwide due to COVID-19. Media like ours or others like Crypto Economy, try to contribute their grain of sand in this regard, reporting on the latest developments in the crypto ecosystem as well as educating on the blockchain industry.
Cryptocurrencies vs. COVID
At this point may be wondering how COVID-19 affects the use of cryptocurrencies. Fortunately, it does not. At least, not directly. Cryptocurrencies, such as Bitcoin were created to solve the digital currency problem. Bitcoin was created as an alternative to fiat currencies to allow two parties to make online transactions without having to interact with one another.
One way to fight the COVID-19 virus is to avoid social interactions and another one is to avoid using bills and physical forms of money when transacting since the virus pathogens can easily stick to a surface for a long time and physical money was an easy way to propagate the spread of the virus. The use of cryptocurrency is, therefore, unaffected by the spread of the virus. At the very least, some governments are encouraging using digital forms of payments which include the use of cryptocurrencies.
Cryptocurrencies vs. Fiat
As mentioned in the last section, several governments across the world are advising their citizens to avoid using physical fiat money as a way to reduce the spread of the virus. Is that an issue with bitcoin? No, it is not. Is that the only reason to use bitcoin over the dollar? Again, no, it isn’t. Using bitcoin or other cryptocurrencies for normal payments may be to the best interest of most people because of the following: it is cheaper, faster and less intrusive to make payments using bitcoin. The last point references the use of KYC for most digital media accepting the digital dollar such as PayPal, Visa or MasterCard. With bitcoin, you do not have to reveal your identity to use the payment network.
The Adoption Problem
Cryptocurrency adoption has always been on the rise but the rate was gradual. However, things may be changing following the effects of the COVID-19 pandemic. People are staying indoors more and since they are discouraged from leaving their houses, they are being forced to use alternative means of doing basic activities such as shopping. They are now ordering essential items online and making payments digitally. Going forward, there will be more awareness on the use of cryptocurrencies especially that they offer better incentives of usage as compared to their fiat counterparts.
That last point may just be the only silver lining to this pandemic. Cryptocurrency enthusiasts, as well as supporters and investors, could be excited about the prospect of having more awareness in the community about bitcoin. However, the pandemic has negatively affected the economy and most people have so far lost their jobs. Will they be able to buy bitcoin let alone invest in it for the long haul? This remains to be seen but so far things are looking good in terms of adoption metrics.